Australian property company REA, majority owned by Rupert Murdoch's News Corp, has begun negotiations with Rightmove, Britain's largest online property portal.
The initial offer, which is not a formal takeover bid, is reportedly at around 700 pence per share, valuing the company at more than £5.5 billion.
This comes a week after REA confirmed it was considering a cash and shares takeover bid for Rightmove.
REA Group has until the end of September to make a formal offer under UK stock market takeover rules commonly known as “put up or shut up”, but this initial proposal is likely to be rejected by Rightmove's board.
Rightmove shares closed at 555.6p per share on August 30, the last trading day before REA's interest was reported, and closed at 670.8p at the close of trading on the London Stock Exchange on Tuesday.
But analysts believe REA's move against Rightmove, which controls more than 80% of the UK online property market, is opportunistic and the business is undervalued, with profits expected to grow in the coming years as the UK property market recovers.
After reports of a possible takeover by REA broke, analysts at Peel Hunt said Rightmove was “Europe's cheapest listed advertising company”.
In 2001, Murdoch's eldest son, Lachlan, jumped into the struggling REA, buying a 44% stake for A$2 million, and then increased his stake in News Corp to 62% in 2005 after a takeover deal fell through.
The company is now worth A$26 billion (£13.2 billion) and News Corp's overall digital real estate services division, which includes its US operations, accounted for a third of its global profit of $1.5 billion in the year to the end of June.
In October, US giant CoStar It paid £100 million for small UK property company OnTheMarket. This will be the starting point of an ambition to “actively enter” the real estate portal business across Europe.
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In 2018, US private equity group Silver Lake bought Zoopla, the UK's second-largest property portal and owner of brands such as PrimeLocation, for £2.2bn.
News that initial talks had begun between REA and RightMove was first reported by Bloomberg.
REA and Rightmove declined to comment.
