REA, the Australian property company majority-owned by Rupert Murdoch’s News Corp, has started talks with Rightmove, the UK’s biggest online real-estate portal.
The initial proposal, which does not constitute a formal offer, is reportedly in the low-700p a share range, which would value the firm at more than £5.5bn.
It comes a week after REA confirmed it was considering a cash and share offer for Rightmove.
REA Group has until the end of September to make a formal offer under UK stock market takeover rules, more commonly known as “put up or shut up”, and the opening gambit is likely to be rejected by Rightmove’s board.
Shares in Rightmove closed at 555.6p a share on 30 August, the last trading day before news of REA’s interest was revealed in the press, and closed at 670.8p at the end of trading on the London Stock Exchange on Tuesday.
However, analysts believe that the move by REA for Rightmove, which controls more than 80% of the UK online property market, is opportunistic and that the business is undervalued – with profits expected to rise in the coming years as the UK property market rebounds.
After news of a potential bid by REA, Peel Hunt analysts said that Rightmove is the “cheapest publicly listed classifieds businesses in Europe”.
In 2001, Murdoch’s eldest son, Lachlan, swooped on the struggling REA, taking a 44% stake for A$2m, and increased News Corp’s stake to 62% in 2005 after a takeover deal fell through.
The company is now worth A$26bn (£13.2bn) and News Corp’s overall digital real-estate services division, which includes operations in the US, accounted for a third of total global profits of $1.5bn in the year to the end of June.
In October, the US property data company CoStar paid £100m for the UK’s OnTheMarket as a launchpad for its ambition to “participate aggressively” in the property portal game across Europe.
after newsletter promotion
In 2018, the US private equity group Silver Lake acquired Zoopla, the UK’s second-biggest property portal and owner of brands including PrimeLocation, for £2.2bn.
Bloomberg first reported the news of the opening of initial talks between REA and RightMove.
REA and Rightmove declined to comment.