11th Sep 2024 12:12
(Alliance News) - Rightmove PLC on Wednesday rejected a takeover approach from Australia's REA Group Ltd, and analysts at Panmure Liberum do not expect a sizeable enough offer to come.
Milton Keynes, England-based Rightmove and Melbourne, Australia-based REA Group both provide online property buying portals.
REA on Monday last week, in response to "press speculation", confirmed it was considering a cash and share takeover offer for its UK peer. It claimed it sees a "transformational opportunity" in the potential combination.
On Wednesday, however, REA and Rightmove confirmed that the latter had rejected REA's "unsolicited, non-binding and highly conditional" proposal to acquire its entire share capital.
Had Rightmove accepted the proposal and subsequently a firm offer, its shareholders would be entitled to 305 pence in cash, plus 0.0381 of a new REA share, for each Rightmove share.
REA said the proposal implies a total offer value of 705p per Rightmove share and values the entire share capital at around GBP5.6 billion, although Rightmove said it implies an offer value of 698p.
Rightmove shareholders would be left with approximately 18.6% of the combined firm's issued share capital.
Shares in Rightmove were trading 0.5% higher at 674.00p on Wednesday afternoon in London for a GBP5.32 billion market capitalisation.
REA shares on Wednesday closed down 2.2% at AUD197.99 in Sydney for a AUD26.16 billion, about GBP13.32 billion, market cap.
Panmure Liberum analysts said the bid "remains opportunistic".
"We don't believe there are significant cross-border synergies in this market. While some have suggested REA would seek to unlock revenue synergies by migrating Rightmove's model to a vendor-pay model (thereby cutting out the agent), there is nil culture of this in the UK and we think it would be a very high risk strategy - hence why it hasn't been executed previously," the broker said.
"This lack of synergies is likely to inhibit REA's ability or desire to pay a true control premium, which we've estimated would represent up to a 60% premium to Rightmove's undisturbed share price."
As a result, it believes a "significantly" higher offer is unlikely to come.
AJ Bell analyst Russ Mould commented: "A 27% bid premium was never going to be taken seriously by the company or its shareholders. REA would have to stump up a lot more to get the deal over the line. Now comes the interesting part where we see if REA is serious in its pursuit for Rightmove, or whether it was simply trying its luck at a bargain price.
"Rightmove has two key characteristics which theoretically deserve an above-average bid premium. First, it is the UK market leader in its field and second, it is a unique asset on the London Stock Exchange. Shareholders know it holds these qualities and they aren't going to let it go without proper compensation."
By Eric Cunha, Alliance News news editor
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