REA Abandons Rightmove Pursuit After Latest Rejection — 3rd Update

By Ian Walker

Australia's REA abandoned its pursuit of U.K. peer Rightmove, which earlier Monday rejected a sweetened $8.29 billion offer by the property-listing giant controlled by Rupert Murdoch's News Corp.

The retreat comes as the mogul faces down a succession battle in a court in Nevada and amid long-running calls by activist investors in News Corp to shed its digital real-estate assets.

The Australian real-estate advertiser said Monday that it doesn't intend to make an offer for Rightmove.

It said the approach was driven by a clear strategic rationale and the opportunity to create a global and diversified digital property company, underpinned by number one positions in Australia and the U.K.

REA added that it is committed to its capital allocation framework and maintains a disciplined approach to mergers and acquisitions.

News Corp is the parent company of Dow Jones & Co., publisher of The Wall Street Journal and Dow Jones Newswires. REA is 61% owned by News Corp.

"We strongly support the decision by the REA team to withdraw from the potential acquisition of Rightmove," News Corp Chief Executive Robert Thomson said, adding that it would be foolhardy to overpay for an asset.

"As for Rightmove, we wish them well in an increasingly competitive British market--unfortunately, the company's Board did not make the right move," Thomson added.

On Friday the Australian real-estate advertiser tabled a new proposal to buy Rightmove--which followed the rejections of its previous three approaches--under which accepting Rightmove shareholders would receive 346 pence in cash and 0.0417 new REA shares for each share held. They would also receive a special dividend of 6 pence in cash, in lieu of any final dividend for this year.

The latest terms imply a value of 781 pence a Rightmove share, including the dividend, based on REA's closing price of 200.00 Australian dollars ($138.06) on Friday.

Rightmove rejected REA Group's fourth proposal earlier on Monday saying the latest offer remained unattractive and continued to materially undervalue Rightmove and its future prospects, and couldn't be recommended by the board.

The London-listed online property portal said it had fully considered the latest proposal and that Chairman Andrew Fisher agreed to meet with REA Chair Hamish McLennan to present the offer and start talks, with a further meeting held with executives from both companies.

Rightmove said no information was presented at either meeting that was new or different from that which had previously been made public, or that changed its opinion about the proposal.

It said the board believed it was in shareholders' best interests for the company to continue its standalone strategic plan as outlined in its capital markets day in November.

REA had until 1600 GMT to either make a formal proposal to buy Rightmove or walk away under U.K. takeover rules.

Rightmove shares were down 52.0 pence, or 7.8%, at 616.60 pence in early afternoon European trading. However, they are currently up 7.1% over the year to date.

"We respect REA and the success they have achieved in their domestic market. However, we remain confident in the standalone future of Rightmove," Fisher said Monday.

"We are always financially disciplined when we look at M&A and reinvestment in our business and will continue to focus on the many other opportunities ahead of us," REA Chief Executive Owen Wilson said Monday.

"Thanks to Lachlan Murdoch's savvy investment in REA, digital property has become an important engine of growth at News Corp. We have no doubt that REA will continue to successfully expand into auspicious adjacencies and are excited by their progress in India, where the company is now the market leader and benefiting from the express economic growth in the world's largest country," News Corp's Thomson said.

Activist investors including Starboard Value have agitated for News Corp to shed its digital real-estate assets.

Instead, News Corp appears to be looking to get deeper into the digital real-estate business at a time when central banks are starting to cut interest rates, potentially giving property markets a shot in the arm by lowering borrowing costs. REA would apply for a secondary listing in London as part of the acquisition.

News Corp first bought a stake in Australia's real-estate platform, which was founded in a garage in 1995, in the aftermath of the dot-com crash. It paid around $1.3 million in cash plus free advertising for a 44% stake.

The deal has proven a canny investment, with REA's value close to $20 billion before its interest in Rightmove was announced. Its stock is currently up 11% over the year to date and 30% higher over the past 12 months.

Write to Ian Walker at ian.walker@wsj.com

(END) Dow Jones Newswires

September 30, 2024 09:04 ET (13:04 GMT)

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