Rupert Murdoch's Australian property group REA has increased its takeover bid for Rightmove, Britain's largest online property portal, to £5.9 billion.
REA, 61% owned by Murdoch's News Corp, increased its initial offer by around £300 million after Rightmove's board last week unanimously rejected its initial proposal as a “fundamental undervaluation”.
The initial cash and share offer valued the business at 705p per share, which would give Rightmove shareholders 18.6% of the enlarged REA Group following the transaction, but has now been raised to around 750p.
Rightmove called REA's initial, non-binding proposal “completely opportunistic” and a takeover attempt before its profits and share price recover as the UK property market recovers, and urged shareholders to stick with the company and stay away from REA.
Rightmove shares closed at 555.6p on August 30, the last trading day before reports of REA's initial interest broke. Takeover interest has since caused the company's market value to soar, to nearly 675p, giving it a market capitalisation of nearly £5.5bn.
Under UK takeover rules, informally known as PUSU (“put up or quiet up”), REA has until the end of this month to decide whether to make a formal offer for Rightmove or abandon its bid for the company.
After making its initial offer, REA said it intended to pursue a secondary listing on the London Stock Exchange if it ultimately completed a transaction with Rightmove, arguing that this would “offer a wider investor base the opportunity to gain exposure to a global, diversified digital real estate company on the LSE”.
After reports of a possible takeover by REA broke, analysts at Peel Hunt said Rightmove was “Europe's cheapest listed advertising company”.
The UK online property market has been the focus of an increasing number of mergers and acquisitions in recent years. Last October, US property data company CoStar Paid £100 million The company sees its UK OnTheMarket site as a springboard for “active participation” in the pan-European property portal market.
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.
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Murdoch's eldest son, Lachlan, jumped into the struggling REA in 2001, buying a 44 percent stake for A$2 million (£1 million), and then increased his stake in News Corp to 62 percent in 2005 after a takeover deal fell through.
The company has a market capitalization of A$26 billion, and News Corp's digital real estate services division, which includes its U.S. operations, accounted for a third of its global profit of $1.5 billion in the year to the end of June. News of REA's increased bid for Rightmove was first reported by the Financial Times.
