- REA controlled by Rupert Murdoch’s News Corp expresses interest
- Online property portal faces competitive threat from CoStar-backed On The Market
- Year-to-date Rightmove shares up 20%
Shares in Rightmove (RMV) soared 22% to 677p in morning trading as Australian property listings company REA (controlled by Rupert Murdoch’s News Corp) said it was considering making an offer for the online property portal.
‘REA indicated that it would structure any bid as a cash and shares deal which would mean Rightmove investors could maintain exposure to the company post-takeover through the equity component,’ said Russ Mould, investment analyst at AJ Bell.
REA’s interest could spark other potential interest in UK market-leader Rightmove including from cash-rich private equity firms.
Under takeover code rules, REA has until 5pm on 30 September to formally make an offer or walk away.
CO-STAR THREAT
Last October, New-York listed property giant Co-Star (CSGP:NYSE) made an all-cash offer for Rightmove rival OnTheMarket (OTMP:AIM) for £100 million.
Co-Star which runs US websites Homes.com, LoopNet,com and Apartments.com has put pressure on Rightmove’s dominant market share in the UK.
‘CoStar’s acquisition of OnTheMarket opened up a significant discount in Rightmove’s valuation to peers. We see REA’s potential bid as opportunistic given the wide gulf in relative valuation between Rightmove and peers – particularly given the offer is likely to be made in shares and the premium at which REA trades to Rightmove,’ said Sean Kealy research analyst at Panmure Liberum.
NEED FOR PREMIUM
Panmure Liberum’s Kealy added: ‘Any successful deal should require a large premium (potentially up to 60%) to Rightmove’s undisturbed share price. We believe there are typically limited cross-border synergies in property classifieds, with local market differences requiring local operations, further underlining the opportunistic nature of any potential bid.
‘This does, however, underline our oft-restated view that the cheapest way to become the number one property portal in the UK is to buy Rightmove – not to buy OnTheMarket and attempt to scale it.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Tom Sieber) own shares in AJ Bell.
