REA Group shares dip as Rightmove board rejects takeover bid
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More news: Shares in REA Group dipped after the real estate listings group confirmed that the board of UK property portal Rightmove rejected its takeover bid on Tuesday.
REA shares lowered 2.6% to $197.19 by 1:55pm AEST, having gained more than 20% since January.
E&P Capital analyst Entcho Raykovski said that a transaction on the terms proposed by REA could result in a 15% accretion to earnings per share for REA shareholders in FY25 and FY26, "slightly higher" than the 13% accretion previously estimated by E&P.
Raykovski noted this was primarily as a result of REA's 27% premium coming in slightly lower than E&P's predicted 30% premium.
He flagged that if REA wanted to pursue the deal, the group must present the offer directly to Rightmove shareholders without the endorsement of its board, or improve the deal by offering extra cash, which would "likely require some equity capital to be raised".
What they said: "We see merit in the deal but wouldn’t want to see REA increase the price to a level where the financial metrics are no longer attractive," Raykovski said.
Rightmove board rejects REA Group's takeover offer
The news: Murdoch-controlled real estate listings group REA has confirmed that it made a non-binding indicative proposal to buy the UK's largest property portal Rightmove last week. However, Rightmove's board rejected the offer on Tuesday.
The numbers: REA said its cash and share offer implies a total offer value of £7.05 ($13.86) for each Rightmove share and values the company's entire share capital at around £5.6 billion ($11 billion).
The terms of the proposal represent a 27% premium to Rightmove's share price of £5.56 on 30 August, being the last business day prior to the date of REA's possible offer announcement on 2 September.
Under the terms of the proposal, Rightmove shareholders would hold around 18.6% of the combined group's issued share capital following completion of the deal.
The context: REA said the cash component of the proposal is expected to be funded through third-party debt and existing cash resources. REA also noted that it intends to apply for a secondary listing of all of its ordinary shares in London, which would enable REA shares to trade on both the London Stock Exchange (LSE) and the ASX. This would allow a wider pool of investors to gain exposure to the expanded property company via the LSE, it said.
REA said the proposal would unlock value for both Rightmove and REA shareholders by creating a "global and diversified digital property company, with strong margins and significant cash generation, underpinned by number one positions in Australia and the UK".
The sources: ASX announcement, E&P Capital research
