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Rightmove has rejected a £5.6 billion cash and shares takeover bid from Australia’s REA Group, saying the offer undervalued the company’s prospects.
“The board has carefully considered the proposal and concluded that it is entirely opportunistic and fundamentally undervalues Rightmove and its future potential,” Rightmove said in a statement after its board unanimously rejected the proposal.
Below is the statement released by Rightmove:
“The Board of Rightmove plc has taken note of the announcement from REA Group Ltd (“REA”) and confirms that it has received an unsolicited, non-binding and highly conditional proposal from REA. Regarding a possible cash and shares offer to acquire all of the issued and to be issued ordinary shares of Rightmove (the “Offer”).
“The offer was for 305 pence in cash and 0.0381 new REA shares for each Rightmove ordinary share, based on REA’s closing price on 10 September 2024.1This represents a purchase price of 698 pence and a premium of 26% to Rightmove’s closing share price on 30 August 2024 (the business day preceding 2 September 2024, the date of announcement of REA’s takeover bid).
“The Board has carefully considered the proposal, together with its financial advisors, and has concluded that the proposal is entirely opportunistic and fundamentally undervalues Rightmove and its future prospects. The Board therefore unanimously rejected the proposal on 10 September 2024.”
“Rightmove shareholders should not take any action in relation to this proposal.”
“This announcement has been made without the consent or approval of the REA. There can be no certainty that an offer will be made or what the terms of the offer will be.”
“Any takeover offer for Rightmove would be governed by the City Code on Takeovers and Mergers (the “Code”). Under rule 2.6(a) of the Code, REA must, by 5pm on 30 September 2024, either announce its firm intention to make a takeover offer for Rightmove in accordance with rule 2.7 of the Code, or announce that it has no intention to make an acquisition. In the latter case, the announcement will be treated as a statement to which rule 2.8 of the Code applies. This deadline may be extended with the consent of the Takeovers Committee pursuant to rule 2.6(c) of the Code.
“Further updates will be provided in due course at the appropriate time.”
Shares in REA, 62% owned by Rupert Murdoch’s News Corp, fell 2.5%.
The UK housing market is three times the size of Australia’s, according to analysts at Jefferies, and the deal would have allowed REA to accelerate growth in higher-margin international markets.
The Australian company had proposed to pay 705 pence per Rightmove share, representing a 27% premium on the UK company’s closing price of 556 pence on August 30, and the REA has since confirmed the talks.
Below is the REA Group statement:
“This announcement is made in accordance with REA’s obligations as a company whose shares are listed on the Australian Securities Exchange (ASX).”
“Further to recent press speculation regarding a takeover bid by REA for Rightmove plc (“Rightmove”), REA has September 5, 2024 REA has made a non-binding indicative proposal (the “Proposal”) to the Board of Rightmove for the potential acquisition of all of the issued and to be issued share capital of Rightmove in a cash and shares transaction. REA was informed on 10 September 2024 that the Board of Rightmove had rejected the Proposal.
“Under the terms of the proposal, Rightmove ordinary shareholders will receive for each Rightmove share:
“305 pence in cash and 0.0381 new REA shares
“Based on the closing price of REA shares of A$205.51 on 5 September 2024, when the proposal was submitted to Rightmove’s board, and an AUD/GBP exchange rate of 1.956, the proposal provides for an aggregate consideration of 705 pence per Rightmove share and values Rightmove’s entire issued and to be issued ordinary share capital at approximately £5.6 billion.
“The terms of the proposal are as follows:
· This represents a 27% premium to Rightmove’s share price of 556 pence as at 30 August 2024 (as at 2 September 2024, the business day prior to the announcement of REA’s takeover bid).
· This represents a 29 per cent premium to Rightmove’s six-month volume-weighted average share price of 548 pence.
· This represents a 31% premium to Rightmove’s 12-month volume-weighted average share price of 540 pence.
· The enterprise value multiple is approximately 20.5 times Rightmove’s EBITDA of £272 million for the 12 months to 30 June 2024.
“Subject to the terms of the proposal, following completion of the proposed transaction, Rightmove shareholders will hold approximately 18.6% of the issued share capital of the combined group. The cash component of the proposal is expected to be funded from third party borrowings and existing cash resources. Given the strong growth and high cash generation of both REA and Rightmove, REA expects the enlarged group to be able to deleverage rapidly in line with REA’s track record.”
“REA intends to apply for a secondary listing of its ordinary shares in London, which will enable REA’s ordinary shares to trade on both the London Stock Exchange and the Australian Securities Exchange in a fully fungible manner. This will give a wider investor base the opportunity to invest in a global, diversified digital real estate company on the London Stock Exchange.”
“The proposal combines significantly higher cash value certainty than recent transactions, whilst providing Rightmove shareholders with the opportunity to benefit from future value creation from the combined business.
“The REA considers this proposal to be very compelling as it:
· Building on its number one positions in Australia and the UK, it will create a global, diversified, digital real estate company with high margins and significant cash generation potential, driving value for both Rightmove and REA shareholders.
· We will leverage REA’s world-leading capabilities and expertise to drive value for customers and consumers across our combined portfolio.
· REA’s experience of investing and growing in adjacent regions will support Rightmove’s ambitions to accelerate expansion in these areas whilst minimising execution risk.
· Benefit from knowledge transfer, cutting-edge technological capabilities, and targeted investment and support for innovation in a competitive market.
· Improving the experience of UK property buyers, sellers and renters and contributing positively to the property market ecosystem.
“Under the terms of the offer, Rightmove shareholders will retain their right to receive the 2024 interim dividend of 3.7 pence per share, as announced by Rightmove on 26 July 2024, unless the terms of the offer are reduced.
“The Offer is non-binding and subject to customary conditions, including the completion of due diligence satisfactory to REA. REA reserves the right to waive all or any of the conditions to the Offer.”
“There can be no certainty that REA will make an offer to Rightmove shareholders or that any transaction will proceed. REA shareholders do not need to take any action at this time.”
“Subject to Rule 2.5(a) of the Terms, REA reserves the right: (i) to introduce other forms of consideration and/or to change the mix or structure of the consideration in the Offer; and (ii) to conduct transactions through or jointly with any subsidiary of REA or any company that becomes a subsidiary of REA.” The REA also reserves the right to make a takeover offer for Rightmove at a lower value and/or on less favourable terms than those set out in this Announcement: (i) with the consent or recommendation of the Board of Rightmove, (ii) if a third party announces a firm intention to make a takeover offer for Rightmove or (iii) after Rightmove announces a Rule 9 exempt transaction or a reverse takeover (as defined in the Code) pursuant to Appendix 1 to the Code. If, after the date of this Announcement, Rightmove declares, makes or pays any dividends or distributions or other returns of capital to shareholders other than the previously declared interim dividend of 3.7 pence per Rightmove share declared on 26 July 2024, the REA reserves the right to make an equivalent reduction in the offer.
“The REA will continue to provide information to the ASX in accordance with its obligations.”
“The release of this announcement was approved by the Disclosure Committee.”
What does the Rightmove acquisition mean for UK estate agents?
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