(Bloomberg) -- Rightmove Plc said it will consider a £6.1 billion ($8.1 billion) sweetened bid from REA Group Ltd., the third proposal in less than three weeks from the Australian property portal.
The improved offer values Rightmove at 770 pence a share, REA said Monday, or 2.8% higher than its previous bid. REA, which is part of media mogul Rupert Murdoch’s empire, had expressed frustration at the UK firm’s refusal to even discuss a deal after rejecting its two previous offers.
Rightmove said its board “will carefully consider the increased proposal, together with its financial advisers,” according to a statement Monday.
The UK’s go-to website for property listings has managed to extract quickfire sweeteners from REA worth about £500 million by previously keeping its doors closed. The interest from the largest player in the Australian online real estate industry has sent Rightmove’s stock soaring 25% since the start of September, trading at 694 pence apiece in London early Monday.
The risk for Rightmove shareholders is that REA walks away and shares in the UK company slump. Under the terms of the most recent offer, Rightmove investors would receive 341 pence in cash and 0.0422 new REA shares.
Rightmove has maintained steady revenue growth in recent years and its future prospects are looking bright as the UK housing market is expected to pick up on declining interest rates and efforts by the new Labour government to increase housing supply through a slew of planning reforms.
The strength of Rightmove’s fundamentals explain the acquisition interest, with more high-single-digit sales gains likely in 2024-25, according to a Bloomberg Intelligence report. The British firm may yet again reject the offer, and a bid north of 800 pence is more likely to be accepted, according to BI.
What Bloomberg Intelligence Says:
“Rightmove may reject REA’s third non-binding proposal to acquire Rightmove — which the former says is worth 761 pence a share — but we believe a bid worth north of 800 pence a share is more likely to be accepted.”
— Tom Ward, BI industry analyst.
While Rightmove enjoys the largest market share in the UK property portal market, rival OnTheMarket Plc recently launched an expansion drive after being acquired by US real estate firm CoStar Group Inc. Giles Thorne, a Jefferies analyst, described CoStar’s investment in OnTheMarket as “a serious competitive threat.”
REA has already expanded into other markets including India. REA plans to have a secondary stock market listing in London if it buys Rightmove.
Before Rightmove announced its decision to consider the latest offer, it had rejected proposals from REA for 705 pence a share and 749 pence a share. REA pushed the London-based company’s shareholders to agitate for talks to kick off. It urged them to encourage the UK company “to engage in constructive discussions.”
“We are genuinely disappointed at the lack of engagement by Rightmove’s board,” REA Chief Executive Officer Owen Wilson said.
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(Updates with share price in fourth paragraph and analyst comment in seventh.)
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