REA Abandons Rightmove Pursuit After Latest Rejection — 4th 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 another offer for Rightmove. It said its initial approach was driven by a clear strategic rationale and an opportunity to create a global and diversified digital property company.

REA said, however, 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," said News Corp Chief Executive Robert Thomson.

On Friday, REA 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, or about $4.63, in cash and 0.0417 new REA shares for each share held. They would also receive a special dividend of six pence in cash, in lieu of any final dividend for this year.

The latest terms imply a value of 781 pence per Rightmove share, including the dividend, based on REA's closing price of 200 Australian dollars, or about $138, 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 later Monday to either make a formal proposal to buy Rightmove or walk away under U.K. takeover rules.

Rightmove shares were down 52 pence, or 7.8%, at 616.60 pence in early afternoon European trading. However, they are currently up some 7% 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.

Activist investors including Starboard Value have agitated for News Corp to shed its digital real-estate assets. Instead, with the proposed deal, News Corp had been pushing to get deeper into the business at a time central banks are starting to cut interest rates, potentially giving property markets a shot in the arm by lowering borrowing costs.

The deal would have been the largest by a Rupert Murdoch-related entity in a number of years and came at a delicate time for the media mogul. He and his offspring are engaged in a dispute over the family trust that holds the controlling stakes in News Corp and Fox Corp., owner of Fox News.

News Corp first bought a stake in REA, 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 09:41 ET (13:41 GMT)

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