REA Group shares drop as it urges Rightmove to engage takeover bid
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The news: REA Group shares opened lower after it urged Rightmove's board to engage after submitting a fourth takeover offer, while analysts expect the News Corp-owned group will need to improve its bid further.
The numbers: Murdoch-controlled real estate platform REA submitted a fourth bid for Rightmove on Friday, ahead of its 30 September deadline to make a firm offer. The bid implied a total offer value of £7.81 ($15.11) for each Rightmove share, up from its rejected offer of £7.70 per share, valuing the UK property portal at around £6.2 billion.
REA's shares dropped 1% in early trading to $198.01.
The context: The fourth proposal by REA follows three prior cash and share offers for Rightmove, all of which of have been rejected. REA said it "reiterates its disappointment and surprise at the repeated rejections of its prior proposals by the board of directors of Rightmove".
"REA urges Rightmove shareholders to use what little time remains [...] to make their views known to the board of directors of Rightmove" ahead of the 30 September deadline, the company said.
E&P Capital analyst Entcho Raykovski noted that REA's latest offer "shows some level of restraint from REA management", and doubted whether Rightmove's board would engage given their reluctance to date.
"Ultimately, reaching an agreed deal will likely require a further increase," said Raykovski. "[Earnings per share] accretion in the mid-single digits would leave limited room for error if REA was to assume control of Rightmove."
What they said: "While the Rightmove board has refused to meet us, we have enjoyed the opportunity to connect with Rightmove shareholders and to share our vision for the combination of the number one digital property businesses in the UK and Australia," REA CEO Owen Wilson said.
"This is a compelling opportunity to create a true global technology leader on the London market via a secondary listing, operating in two of the most attractive markets in the world," he said.
The sources: ASX announcement, E&P Capital research
