Rightmove rejects REA's fourth offer

Company News

by Glenn Dyer


The Rupert Murdoch-backed REA Group has been forced to abandon its attempt to take over the UK website Rightmove after its fourth offer was rejected on Monday.

September 30 was the deadline for the "put up or shut up" provision in UK takeover rules, which requires a prospective bidder to become an actual bidder within a month of first revealing their intentions.

REA made its interest known a month ago, and despite four attempted offers—each slightly more generous than the previous one—Rightmove refused to engage until last weekend, when its chair communicated to REA’s chair that there would be "no deal."

Rightmove stated on Monday that its board "has fully reviewed the latest proposal with its financial and legal advisers." The board concluded that the latest proposal remains unattractive and continues to materially undervalue Rightmove and its future prospects, making it impossible to recommend the proposal to shareholders.

On Monday, Rightmove announced its latest rejection, prompting REA to decide not to make its fourth proposal, valued at £6.2 billion (around AUD 12 billion), a formal bid.

In a statement to the London stock market, REA expressed its goal to create a “global and diversified digital property company” with market-leading positions in Australia and the UK.

However, there was persistent skepticism in UK business circles and among analysts that the proposed bid lacked substance, serving primarily as a means to prop up the Murdochs' struggling media empire in Britain, led by the faltering tabloid The Sun and the still-sold The Times and Sunday Times.

Moreover, a winning bid would have required an all-cash offer, and although REA is valued at AUD 27 billion, it could not afford such a £12 billion-plus outlay without News Corp providing some of the cash through a placement or participating in a capital raising.

News either couldn’t or wouldn’t do that, so REA was forced to propose a cash-and-share issue that was light on cash and heavy on shares, which UK investors made clear they did not want.

REA CEO Owen Wilson stated that the company had decided to remain “financially disciplined” and would now focus on “the many other opportunities ahead of us.”

News Corp CEO Robert Thomson expressed strong support for REA's decision to withdraw, noting that News owns 61% of REA. “We applaud REA’s financial discipline, as it is foolhardy to overpay for an asset, even if it has evident positive potential,” he said. “Financial discipline has been at the heart of the transformation of News Corp, and our recent successful acquisitions of Dow Jones and HarperCollins reflect that core principle.”

It's worth noting that the Dow Jones acquisition was not recent—it occurred back in 2007, when News paid USD 5.8 billion for the US media group and subsequently wrote down around USD 2 billion of that figure over the next two years.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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