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Australia’s largest property listings company REA Group, majority owned by Rupert Murdoch’s News Corp, is considering a cash and shares offer for its £4.4bn-valued UK peer Rightmove, as it aims to become the largest online real estate business across both markets.
REA, one of Australia’s largest listed companies, said it saw “clear similarities” between the two businesses and a potential acquisition as a “transformational opportunity”.
It has yet to make an approach, but the company revealed it was considering the move after reports that it was working with Deutsche Bank on a large overseas acquisition. Rightmove had a market value of £4.36bn at Friday’s close in London.
REA has until the end of September to formally make an offer or walk away under UK takeover laws now that it has publicly expressed its interest. The company’s stock value has increased by 25 per cent in the past year, with the strength of the Australian housing market boosting profit growth.
Shares in REA dropped 7 per cent after it revealed the potential UK expansion, which is likely to involve an equity raising given the deal’s size.
In a note, stockbroker Angus Aitken described Owen Wilson, a former investment banker appointed REA chief executive in 2018, as a “sensible” executive looking to make a “common sense” acquisition.
“In the end, the worst M&A is ego-driven,” he wrote. “There is no ego here in our view, this is all about long-term economic returns.”
REA was founded in the mid-1990s in a garage in the Melbourne suburb of Doncaster and briefly became a stock market darling during the dotcom bubble after it floated on the Australian Securities Exchange in 1999.
Its shares then crashed and News Corp bought a 44 per cent stake in 2001 for about A$2mn, in what has been described as one of Lachlan Murdoch’s smartest moves. News Corp increased its stake to 62 per cent in 2005 after it tried to buy out REA for A$120mn but was rebuffed. The company is now worth A$26bn (US$17.6bn).
The activist investor Starboard Value last year put pressure on News Corp to separate its property businesses — including the REA stake — from the broader media business in order to unlock value.
REA has operations in India and a 20 per cent stake in Move Inc — the US online listings company also controlled by News Corp — but it has also quit some international markets.
It built a European online listings business that was sold to the UK’s Oakley Capital Private Equity in 2016. Last month, it sold its minority stake in south-east Asian real estate listings company PropertyGuru after it was sold to Swedish investor EQT.