Rightmove suitor walks away after sweetened offer is rejected

Rightmove’s Australian suitor has walked away from takeover talks after having its sweetened £6.2 billion offer rejected.
REA Group confirmed on Monday afternoon, hours before a “put up or shut up” deadline, that it was withdrawing its interest in buying the property search website.
Rightmove shares closed down 51¼p, or 7.7 per cent, at 617½p.
REA’s fourth indicative offer, made last Friday, comprised 346p in cash plus 0.0417 REA shares and a 6p dividend for each Rightmove share. In total, it worked out at around 780p per share, 10p more than REA had previously said it was prepared to pay and valuing Rightmove at £6.2 billion.
Rightmove’s board considered the proposal over the weekend and concluded on Monday morning that REA’s offer “remains unattractive and continues to materially undervalue Rightmove and its future prospects”.
In response to the latest rejection, REA, which is 61 per cent-owned by News Corp, publisher of The Times, was critical of Rightmove directors for what it called “a lack of meaningful engagement”, which it said had “impeded the ability to progress discussions”.
“They had nothing to lose by engaging with us,” Owen Wilson, REA’s chief executive, said.
REA Group said its approach was driven by a clear strategic rationale and the opportunity to create a global and diversified digital property company, with strong margins and significant cash generation.
Robert Thomson, chief executive of News Corp, said: “We strongly support the decision by the REA team to withdraw from the potential acquisition of Rightmove. We applaud REA’s financial discipline, as it is foolhardy to overpay for an asset, even if it patently had positive potential. Financial discipline has been at the heart of the transformation of News Corp and our recent successful acquisitions of Dow Jones and HarperCollins reflect that core principle.
“Thanks to Lachlan Murdoch’s savvy investment in REA, digital property has become an important engine of growth at News Corp. We have no doubt that REA will continue to successfully expand into auspicious adjacencies and are excited by their progress in India, where the company is now the market leader and benefiting from the express economic growth in the world’s largest country.
“As for Rightmove, we wish them well in an increasingly competitive British market — unfortunately, the company’s board did not make the right move.”
Rightmove is the most popular website in Britain for people wanting to move homes, with househunters spending more than 8 billion minutes looking at the site in the first half of this year. The company is the dominant player in its sector with an 86 per cent market share, while its profit margins are the envy of the FTSE 100: for every £1 spent by its 19,000 estate agent and developer customers, Rightmove makes 69p of profit.
Prior to REA’s interest emerging, Rightmove’s shares had underperformed the wider London stock market over the past year, following the takeover of its smaller UK rival OnTheMarket by the US property data giant CoStar, which has said it will invest heavily to become the No 1 player.
That was one of the reasons why REA, which has a stock market value of A$26 billion (£13 billion), wanted to bring together the two businesses, to give it the scale to see off any potential threats to Rightmove’s dominance.
Andrew Fisher, Rightmove’s chairman, sought to reassure shareholders on Monday that the directors “remain confident in the standalone future of Rightmove”. He said it had been a “very disruptive” few weeks for the business.
REA had grown frustrated with how it felt Rightmove directors were handling its takeover interest, claiming last week that it had not heard from them “beyond cursory procedural telephone calls” with Fisher.
On Saturday, Hamish McLennan, REA’s chairman, finally got his meeting with Fisher in London and that was followed by another meeting on Sunday between senior executives from both sides. Nothing in those face-to-face meetings “materially changed the board’s view” of REA’s proposals, Rightmove said.
McLennan had asked Fisher for an extension to the deadline, but that request was declined. Rightmove said there was already “considerable information on Rightmove’s business” in the public domain, such that REA should have enough to go on “to put forward a proposal capable of recommendation, within the 28-day period set out under the UK Takeover Code”.
Under City takeover rules, REA had until 5pm on Monday to make a firm offer or walk away. It will not be allowed to make another offer for six months unless another company make a bid.