Rightmove has rejected a takeover offer from Rupert Murdoch's REA Group, which values the online property firm at £5.6 billion. Rightmove said the proposal "fundamentally undervalued" the company.
REA, which is majority-owned by Murdoch's News Corp, said it had put forward an offer for a cash-and-shares deal, which it said would be worth 705p a share.
Rightmove said: "The board carefully considered the proposal, together with its financial advisers, and concluded that it was wholly opportunistic and fundamentally undervalued Rightmove and its future prospects.
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"Accordingly, the board unanimously rejected the proposal on September 10. Rightmove shareholders should take no action in respect of the proposal."
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.
REA has until 5pm on September 30 to make a firm offer or walk away under City Takeover Panel rules.
Rightmove is the UK's largest online real estate portal, while REA is Australia's largest property website.
Rightmove: what would a takeover attempt 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’s more, the company hasn’t benefitted 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.
“Shareholders might be frustrated at the recent share price performance, but if they’ve stuck around for the past year then they’ve clearly got their eye on the long-term prize,” says Mould.
He adds that Rightmove is “a unique asset on the UK stock market”, meaning shareholders are “unlikely to accept the first bid that comes along”.
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