REA's share price impact on Rightmove bid keeps analysts divided
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The news: Analysts see property listing firm REA Group's sweetened takeover bid for UK’s Rightmove as value accretive but are divided over its share price impact.
The numbers: REA’s latest proposal on Monday consists of 341 pence in cash and 0.0422 new REA shares, giving Rightmove an implied value of 770 pence per share. The UK company, which had quickly rejected the first two proposals, said it would consider the 'highly conditional' bid.
REA shares edged 0.15% higher to $194.30 in early trading on the ASX.
The context: JP Morgan analysts expect the sticker shock rise in gearing should decline soon after any deal. In addition, they said interest cover would remain fairly comfortable. However, the analysts have a June 2025 price target of $190 for REA.
Bell Potter analysts kept their price target unchanged at $226 a share, with a ‘buy’ rating.
Meanwhile, Morningstar analysts lifted their fair value estimate on REA Group by 4% to $126 a share.
What they said: "We believe the acquisition would be value accretive to REA at current proposed prices," Morningstar analysts said in a note.
"We also believe REA would be able to create synergies with the UK-based business, which makes half as much revenue as REA despite having a similar market position in a country with more than twice the population of Australia."
The sources: Morningstar Research, JP Morgan research, Bell Potter research
