Rightmove has rejected a £5.6bn cash-and-stock takeover proposal from Australia’s REA Group, citing that the bid undervalued its prospects.

The Australian company had offered to pay a total of 705 pence per Rightmove share, representing a premium of 27% to the British company’s closing price of 556 pence on 30 August, after which REA confirmed discussions.

“The board carefully considered the proposal… and concluded that it was wholly opportunistic and fundamentally undervalued Rightmove and its future prospects,” Rightmove said in a statement, after the board unanimously rejected the proposal.

Here is the statement just issued by Rightmove: 

“The Board of Rightmove plc notes the announcement from REA Group Ltd (“REA”) and confirms that it received an unsolicited, non-binding and highly conditional proposal from REA regarding a possible cash and shares offer to acquire the entire issued and to be issued ordinary share capital of Rightmove (the “Proposal”).

“The Proposal was 305 pence in cash and 0.0381 new REA shares for each Rightmove ordinary share. Based on the closing price of REA on 10 September 2024¹, this implies an offer value of 698p and a premium of 26% to the undisturbed closing share price of Rightmove as of 30 August 2024 (being the last business day prior to the date of REA’s possible offer announcement on 2 September 2024).

“The Board carefully considered the Proposal, together with its financial advisers, and concluded that it was wholly opportunistic and fundamentally undervalued Rightmove and its future prospects. Accordingly, the Board unanimously rejected the Proposal on 10 September 2024.

“Rightmove shareholders should take no action in respect of the Proposal.

“This announcement is being made without the agreement or approval of REA. There can be no certainty that any offer will be made nor as to the terms on which any offer may be made.

“Any offer for Rightmove is governed by the City Code on Takeovers and Mergers (the “Code”). Under Rule 2.6(a) of the Code, REA must, by not later than 5.00 p.m. on 30 September 2024, either announce a firm intention to make an offer for Rightmove in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies. This deadline can be extended with the consent of the Takeover Panel in accordance with Rule 2.6(c) of the Code.

“A further update will be provided as and when appropriate.” 

Shares in REA, which is 62% owned by Rupert Murdoch’s News Corp  fell 2.5%.

Britain’s housing market is considered triple the size of Australia’s, according to Jefferies analysts, and a deal would have allowed REA to expedite growth in lucrative international markets.

Here is the statement from REA Group: 

“This announcement is made in accordance with REA’s obligations as a company whose shares are listed on the Australian Securities Exchange (“ASX”).

“Further to recent press speculation in relation to REA’s possible offer for Rightmove plc (“Rightmove”), REA confirms that on 5 September 2024 it made a non-binding indicative proposal to the Board of Directors of Rightmove regarding a possible cash and share offer for the entire issued and to be issued share capital of Rightmove (the “Proposal”). REA was informed on 10 September 2024 that the Rightmove Board rejected the Proposal.

“Under the terms of the Proposal, ordinary shareholders of Rightmove would receive for each Rightmove share:

“305 pence in cash and 0.0381 new REA shares

“Based on the closing share price of REA’s shares of A$205.51 and the A$/£ exchange rate of 1.956 on 5 September 2024, being the date the Proposal was made to the Board of Directors of Rightmove, the Proposal implies a total offer value of 705 pence for each Rightmove share and values Rightmove’s entire issued and to be issued ordinary share capital at approximately £5.6 billion.

“The terms of the Proposal represent:

·      a 27 per cent. premium to Rightmove’s undisturbed share price of 556 pence on 30 August 2024 (being the last business day prior to the date of REA’s possible offer announcement on 2 September 2024); 

·      a 29 per cent. premium to the Rightmove’s 6-month volume weighted average share price of 548 pence;

·      a 31 per cent. premium to the Rightmove’s 12-month volume weighted average share price of 540 pence; and

·      an enterprise value multiple of approximately 20.5x Rightmove’s EBITDA for the twelve months ended 30 June 2024 of £272 million.

“Under the terms of the Proposal, Rightmove shareholders would hold approximately 18.6 per cent. of the combined group’s issued share capital following completion of the proposed transaction. The cash component of the Proposal is expected to be funded through third party debt and existing cash resources. Given the strong growth and high cash generation of both REA and Rightmove, REA expects the enlarged group will be able to rapidly delever, consistent with REA’s track record.

“REA intends to apply for a secondary listing of all of its ordinary shares in London, which would enable trading in REA ordinary shares on both the London Stock Exchange and the Australian Securities Exchange in a fully fungible manner. This would provide the opportunity for a wider pool of investors to gain exposure to a global and diversified digital property company on the London Stock Exchange.

“The Proposal combines certainty of value, in cash, at a significant premium to recent trading while at the same time giving Rightmove shareholders the opportunity to benefit from the future value creation of the combined business.

“REA believes the Proposal represents a highly compelling proposition to:

·      unlock value for both Rightmove and REA shareholders by creating a global and diversified digital property company, with strong margins and significant cash generation, underpinned by number one positions in Australia and the UK;

·      enhance customer and consumer value across the combined portfolio utilising REA’s globally leading capabilities and expertise;

·      apply REA’s experience in investing in and growing adjacencies to support Rightmove in its ambition to accelerate expansion in these areas, while minimising execution risk;

·      benefit from knowledge transfer, leading technical capabilities as well as support from targeted investment and innovation in a competitive market; and

·      enhance the UK property experience for buyers, sellers, and renters, positively contributing to the property market ecosystem.

“Under the terms of the Proposal, Rightmove shareholders would remain entitled to receive the 2024 interim dividend of 3.7 pence per share, as announced by Rightmove on 26 July 2024, without any reduction to the terms of the Proposal.

“The Proposal is non-binding and subject to customary conditions, including completion of due diligence to the satisfaction of REA. REA reserves the right to waive in whole or in part any of the conditions to the Proposal.

“There can be no certainty that an offer to Rightmove shareholders will be made by REA or that any transaction will proceed. REA shareholders do not need to take any action at this time.

“In accordance with Rule 2.5(a) of the Code, REA reserves the right to: (i) introduce other forms of consideration and / or vary the mix or composition of consideration of any offer; and (ii) to implement the transaction through or together with a subsidiary of REA or a company which will become a subsidiary of REA. REA also reserves the right to make an offer for Rightmove at a lower value and/or on less favourable terms than those described in this announcement: (i) with the agreement or recommendation of the Board of Rightmove; (ii) if a third party announces a firm intention to make an offer for Rightmove; (iii) following the announcement by Rightmove of a Rule 9 waiver transaction pursuant to Appendix 1 of the Code or a reverse takeover (as defined in the Code). If after the date of this announcement Rightmove declares, makes or pays any dividend or distribution or other return of capital to its shareholders, other than the previously announced interim dividend of 3.7p per Rightmove share declared on 26 July 2024, REA reserves the right to make an equivalent reduction to the Proposal.

“REA will continue to keep the ASX informed in accordance with its obligations.

“The release of this announcement was authorised by the Disclosure Committee.”

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