REA’s push into British property market hits first hurdle with takeover target Rightmove rejecting proposal

REA Group’s bid to list in London and become a global heavy hitter has hit its first hurdle, with takeover target Rightmove rejecting the real estate giant’s $11 billion cash and scrip offer.

News Corp majority-owned REA last week made a non-binding indicative proposal to the board of UK-based Rightmove regarding a possible cash and share offer for the company, but on Wednesday revealed the initial approach was rejected by the target on September 10.

Rightmove is the UK’s largest online property portal and has more than 80 per cent of the residential listings market — ahead of rivals OnTheMarket and Zoopla.

A successful acquisition would propel REA — which operates realestate.com.au, mortgage broking firm Mortgage Choice and property valuation firm PropTrack — into a global business. It would see it dual listed on the London Stock Exchange and enlarge REA’s international presence.

Under the potential deal, Rightmove shareholders would receive 305 pence in cash and 0.0381 new REA shares for each Rightmove share.

Based on the closing share price of REA shares of $205.51 and the exchange rate of 1.956 — when the proposal to Rightmove was made — it implies a total offer value of 705 pence for each Rightmove share and valued the company at about £5.6b ($11b).

REA on Wednesday said given the strong and high cash generation of both companies, it expects the enlarged group to rapidly expand, consistent with the ASX-listed company’s track record.

Hamish McLennan-chaired REA believes the proposal represented a “highly compelling proposition” to unlock value growth for Rightmove and REA shareholders by creating a global and diversified digital property company.

REA intendeds to apply for a secondary listing of its ordinary shares in London, which would enable trading in REA shares on the LSE and ASX.

It said the move would provide the opportunity for a wider pool of investors to gain exposure to a global and diversified digital property company on the LSE.

“The proposal combines certainty of value, in cash, at a significant premium to recent trading while at the same time giving Rightmove shareholders the opportunity to benefit from the future value creation of the combined business,” REA said in a statement.

Shares in REA closed down 2.2 per cent to $198 on Wednesday.