- £5.6 billion cash and stock offer rebuffed
- Board calls approach ‘opportunistic’
- Rightmove shares up 21% year-to-date
Shares in Rightmove (RMV) were little changed at 673p in morning trading after the online property portal rejected an initial £5.6 billion takeover offer from Australian property listing company REA Group (REA:ASX), controlled by Rupert Murdoch’s News Corp.
The Rightmove board said in a statement it had ‘carefully considered the proposal, together with its financial advisers, and concluded it was wholly opportunistic and fundamentally undervalued Rightmove and its future prospects’.
CASH AND SHARE OFFER
On 2 September, REA Group first expressed an interest in Rightmove saying that it would structure any bid as a cash and shares deal.
It followed up that announcement with an offer of 305p in cash and 0.0381 new REA Group shares for each Rightmove ordinary share.
Based on the closing price of REA Group on 10 September 2024, this represented a price of 698p or a premium of 26% to the undisturbed closing share price of Rightmove as of 30 August 2024.
Panmure Liberum’s Sean Kealy expressed concern about the takeover interest at the time, also viewing it as opportunistic and undervaluing the online property portal saying ‘any successful deal should require a large premium (potentially up to 60%) to Rightmove’s undisturbed share price.’
NOT AT ANY PRICE
Russ Mould, investment director at AJ Bell, commented: ‘A 27% bid premium was never going to be taken seriously by the company or its shareholders. REA would have to stump up a lot more to get the deal over the line. Now comes the interesting part where we see if REA is serious in its pursuit for Rightmove, or whether it was simply trying its luck at a bargain price.
‘Rightmove has two key characteristics which theoretically deserve an above-average bid premium. First, it is the UK market leader in its field and second, it is a unique asset on the London Stock Exchange. Shareholders know it holds these qualities and they aren’t going to let it go without proper compensation.’
UK HOUSE PRICES HIT TWO-YEAR HIGHS
Meanwhile, the UK housing market is showing little sign of a slowdown with house prices increasing by 0.3% in August, following a rise of 0.9% in July, with a typical property now costing £292,505 according to the Halifax building society.
Amanda Bryden, head of mortgages at Halifax, said: ‘Recent price rises build on a largely positive summer for the UK housing market. Prospective homebuyers are feeling more confident thanks to easing interest rates. That optimism is reflected in the latest mortgage approval figures, now at their highest level in almost two years.’
The Nationwide building society also said annual house price inflation picked up to 2.4% in August from 2.1% in July, the fastest pace of annual growth since December 2022.
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DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Ian Conway) own shares in AJ Bell.
