Rightmove rejects £6bn takeover offer

Rightmove’s directors have rejected an improved takeover offer from an Australian rival valuing the property portal at £6 billion.
The FTSE 100 company said the offer from Rea Group valued its shares at 759p each and said that the deal “materially undervalues” the business.
Rea had increased its proposed offer for a third time, made up of 341p in cash and 0.0422 new Rea shares.
Rightmove said: “The board considered the increased proposal together with its financial advisers and concluded that the increased proposal continues to be unattractive and materially undervalues the company and its future prospects. Accordingly, the board unanimously rejected the increased proposal.”
The company has an 86 per cent share of the house search market in the UK and high margins. For every £1 spent by estate agents and developers with Rightmove, it made 69p of profit in the first half. About 19,000 estate agents and developers advertise on the portal.
Rightmove said that a fall in Rea shares meant that at last night’s closing share price the offer now valued the company at 759p a share. This compared to a value of 770p a share when the third offer was made. Rightmove shares dipped 1p to 682p this morning.
The shares have been under pressure in recent years owing to concerns about increased competition in the UK market from CoStar, the US property giant, which has purchased the rival platform OnTheMarket. The board of Rightmove has outlined plans to grow its business by moving into new product lines such as commercial property and mortgage broking.
Rea, which is 61 per cent owned by News Corp, the publisher of The Times, said: “Rea is disappointed by the latest rejection from the board of directors of Rightmove and is frustrated that, save for the rejection of Rea’s three previously disclosed proposals, Rea has still had no substantive engagement with Rightmove.”
The Melbourne-based company said it continued to believe that its sweetened indicative offer “represents a highly compelling proposition for Rightmove’s shareholders at a significant premium”. It urged Rightmove shareholders to “encourage Rightmove’s board to engage in constructive discussions with Rea to work towards a recommended transaction”.
Rea, which was founded in 1995 and has a market capitalisation of A$25.5 billion (£13 billion), has until September 30 to make a firm offer or walk away under Takeover Panel rules.
Sean Kealy, analyst at Panmure Liberum, said that Rea was likely to start approaching Rightmove’s shareholders to seek their views on a possible combination.
“We note the toughening of language in the third offer, as well as Rea’s publication of a supplementary presentation detailing the offer. We expect that it will likely choose to approach shareholders over the Rightmove board at this stage, if it hasn’t already,” he said.