Rightmove rejects third takeover bid from Rupert Murdoch’s REA

Rightmove has rejected a third takeover bid from Rupert Murdoch's REA Group, which values the UK online property firm at £6.1bn.

REA, which is majority-owned by Murdoch's News Corp, tabled the offer on Monday. It put forward a cash-and-shares deal worth 705p a share.

The latest rejection comes after Rightmove turned down a £5.6 billion bid from REA earlier this month, which Rightmove said "fundamentally undervalued" the company.

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On Wednesday, bosses at the London-listed property platform unanimously rejected this week’s fresh approach.

Rightmove "concluded that the increased proposal continues to be unattractive and materially undervalues the company and its future prospects". It added that "shareholders should take no action in respect of the increased proposal".

REA has until 5pm on September 30 to make a firm offer or walk away under City Takeover Panel rules. REA said in a statement to the stock market that it is "disappointed" by the latest dismissal and is "frustrated that it has still had no substantive engagement with Rightmove". 

When news of a possible takeover attempt first broke on 2 September, it caused Rightmove’s shares to soar by more than 20% on the day.

At the time REA said it was “considering a possible cash and share offer” for the company because it believed there were “clear similarities between REA and Rightmove in terms of their leading market positions in the core residential business”.

In an article written for MoneyWeek earlier this summer, fund manager Nick Train identified Rightmove as one of three UK stocks set to benefit from long-term growth. The company is currently listed on the London Stock Exchange and is a constituent of the FTSE 100 index. 

Rightmove: what would a takeover mean for investors?

“REA moving on Rightmove would amount to a highly opportunistic bid,” says Russ Mould, investment director at AJ Bell. 

“The target’s share price has been weighed down by investor worries about a lacklustre property market and a new competitive threat after US property giant CoStar struck a deal to expand into the UK,” he adds. 

CoStar bought UK property website OnTheMarket last year, putting pressure on Rightmove as it seeks to retain its reputation as the number-one platform for people looking to buy, sell, or rent a house.

Rightmove’s share price has been broadly flat since the UK property market’s downturn at the end of 2022, meaning many investors will have lost out when the effects of inflation are taken into consideration. 

What is more, the company has not benefited from the rally seen in the broader UK stock market so far this year. Before news of the possible takeover attempt broke on September 2, Rightmove's shares were down around 0.3% year-to-date. Meanwhile, the FTSE 100 was up more than 8% over the same period.

Despite this, shareholders are unlikely to accept a potential takeover attempt without a decent offer being made – particularly now that the outlook for the UK property market is improving. 

Mortgage rates have been coming down for the past few months, and have fallen further since the Bank of England’s first interest rate cut on 1 August. While affordability challenges remain, the latest data suggests buyers are starting to return to the market. 

An uptick in property market activity would spell good news for Rightmove, which makes money from estate agents advertising properties on its sites.