News Corp's REA says $7.3 billion bid for Rightmove was rejected

By Stuart Condie

SYDNEY-News Corp-controlled REA Group will have to sweeten the deal if it is to bring together two of the English-speaking world's dominant real-estate listing websites, after U.K. counterpart Rightmove rebuffed its initial $7.32 billion approach.

Most takeover offers require a premium to gain shareholder approval and analysts have spent the nine days since REA (AU:REA) first acknowledged its interest in Rightmove (UK:RMV) speculating on what would be needed in this case. On Wednesday, REA said Rightmove's board rejected a combination of cash and shares that valued the company at about 5.6 billion pounds.

That would be a 27% premium to Rightmove's valuation prior to REA's public interest and the largest deal by a Rupert Murdoch-related entity in years. It comes at a delicate time for the media mogul, who is engaged in a dispute with his offspring over the family trust that holds the controlling stakes in News Corp (NWS) and Fox Corporation (FOX), owner of Fox News.

Activist investors including Starboard Value have agitated for News Corp to shed its digital real-estate assets. REA is 61% owned by News Corp, which owns Dow Jones & Co., the publisher of The Wall Street Journal.

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.

REA could return with an improved proposal but didn't immediately say whether it would. Some analysts have suggested that it might need to offer Rightmove shareholders a 40%-50% premium, which could then leave little room for error to boost earnings through operational improvements.

Differences between the U.K. and Australia markets also mean there are few cost savings to be found, analysts warn. REA, which offers mortgage brokerage and research services in Australia, said on Wednesday it would help Rightmove to expand into services adjacent to property advertising.

News Corp first bought a stake in Australia's leading 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. REA shares are down about 10% since then, though the stock is still up about 10% in 2024 and has more than doubled in value since mid-2022.

Write to Stuart Condie at stuart.condie@wsj.com

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09-11-24 0240ET

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