News of a possible takeover attempt has caused Rightmove’s shares to soar today (2 September), up more than 22% at the time of writing.
The online property portal has attracted interest from Australian company REA, which is majority-owned by News Corp, the media giant founded by Rupert Murdoch. REA operates residential and commercial property websites in Australia.
REA has confirmed it is “considering a possible cash and share offer” for the company, adding that it believes there are “clear similarities between REA and Rightmove in terms of their leading market positions in the core residential business”.
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The Australian company has not yet approached or had any discussions with Rightmove. “There can be no certainty that an offer will be made, nor as to the terms on which any offer may be made,” it said in a statement released on 2 September.
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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.
A potential takeover could see the company delist from London, adding to ongoing concerns about the domestic stock market. MoneyWeek has contacted Rightmove for comment.
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 this morning, Rightmove's shares were down around 0.3% year-to-date. Meanwhile, the FTSE 100 is 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”.
Another blow for the London Stock Exchange?
Supporters of the London Stock Exchange may feel deflated at news of yet another potential takeover attempt. The UK market has attracted a lot of interest from foreign buyers in recent years, as UK equities remain chronically undervalued compared to their international peers.
As bargain hunters swoop in to snap up opportunities at discounted prices, high-quality companies like Rightmove emerge as clear targets.
“Rightmove, despite the efforts of its competitors, is still by far the leading property portal and the first port of call for any prospective home buyers or movers and for many who just want to be nosey,” says Stephen Perkins, managing director at Yellow Brick Mortgages.
“With increased fees and healthy revenue growth on mortgage and other referrals, it is no surprise that the property portal platform is turning heads of potential buyers or investors,” he adds.
We don’t yet know whether REA will put a formal offer forward, but its interest alone is enough to fuel fears about the rate at which companies are disappearing from the London Stock Exchange. While UK-listed companies made up 11% of the MSCI World in the year 2000, today they represent just 4%.
If an offer is ultimately put forward, Rightmove shareholders will need to weigh up the terms of the deal and whether they are happy to hold the Australian-listed stock, given REA has said it is considering a “possible cash and share offer”.
REA has shown strong performance so far this year, with its shares up 13% year-to-date. It has outperformed the broader Australian equity market, with the S&P/ASX 200 up 6.3% over the same period.
