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Shares in Rightmove rose 22 per cent on Monday after an Australian property listings company controlled by Rupert Murdoch’s News Corp said it was considering an offer for the UK group.
REA Group has yet to make an approach, but it revealed it was considering the move after reports that it was working with Deutsche Bank on a large overseas acquisition.
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 said it saw “clear similarities” between the two businesses and a “transformational opportunity”.
Rightmove has a more than 80 per cent market share in the UK, ahead of rivals Zoopla and OnTheMarket, which recently launched an expansion drive after being acquired by US real estate group CoStar.
The FTSE 100 company warned in March that its customer numbers could fall slightly in 2024 as the estate agents and housebuilders who pay to advertise properties on its site suffer in a market downturn.
UK home sale numbers are slowly recovering from a slump caused by high mortgage rates but are still expected to end this year well below the long-term average.
Rightmove reported in July that its revenue grew 7 per cent in the first half of 2024. Chief executive Johan Svanstrom, who joined last year, has targeted rental homes, mortgage services and commercial property as growth areas, and invested in a venture to digitise home-buying. Its current market capitalisation is £5.3bn.
Peel Hunt analysts said in a note that Rightmove was the “cheapest publicly listed classifieds businesses in Europe” on an enterprise value to ebitda basis.
“Our belief — supported by the takeover interest — is that the shares look attractive, given the stability of [Rightmove’s] core classifieds business and the growth opportunities in other revenue streams,” they said, adding that the company should benefit from falling interest rates boosting property sales.
Shares in REA dropped 7 per cent on Monday after it revealed its interest in Rightmove given any deal is likely to involve an equity raising.
REA’s stock value has increased 25 per cent in the past year, with the strength of the Australian housing market pushing up profits.
In a note, stockbroker Angus Aitken described Owen Wilson, a former investment banker who was 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. 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$27bn (US$18.3bn).
The activist investor Starboard Value last year put pressure on News Corp to separate its property businesses — including the REA stake — from the media business.
REA has had a presence in the UK in the past. It acquired the company behind the Propertyfinder website in 2005 alongside News International, the UK owner of The Times and The Sun, but sold the unit four years later to Zoopla, reportedly at a loss.
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 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 the latter was sold to Swedish investor EQT.