It’s been about a year since we checked in on Rightmove LON:RMV, the FTSE100-listed property portal, but this week might be the last time we write about the nation’s favourite real estate broker, should Rupert Murdoch’s REA Corporation [ASX:REA], succeed in its pursuit. Or maybe not, as as of this morning (30th September) Rightmove had rejected REA’s fourth offer.
Murdoch, whose News Corp NASDAQ:NWSA owns 61% of REA, has been running the pursuit since the beginning of the month. Rightmove suggested that REA was sniffing around on 2nd September, which REA pooh-poohed. Regardless the Australian firm aggressively built up its position in Rightmove. Then on 11th September REA made “an unsolicited, non-binding and highly conditional” GBP5.6bn shares and cash offer for its British counterpart. Rightmove rejected this immediately.
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One thing we know, however, about “The Dirty Digger” is that he is nothing but persistent and tenacious. With Rightmove in REA’s sights more offers came over the following days, upping the offer to GBP6.1bn by 25th September. Rightmove remained poker-faced and refused to engage with REA.
Unattractive offer fundamentally undervalues Rightmove
REA went to the press exhorting Rightmove to open discussions. But the London-based real estate services company responded through the media saying that REA’s offers to date had been “unattractive” and unwelcome and “fundamentally undervalued” the company.
It’s been a tough few years for the real estate sector. Rising inflation has lead to Central Banks around the world pushing up interest rates to dampen-down overheating economies. In turn this made mortgages more expensive and depressed property markets. In the UK, the situation was exasperated by a stubborn cost-of-living crisis, driven by rising energy prices and the repercussions of former prime minister Liz Truss’s disastrous mini budget two years ago.
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But data published today from building society Nationwide claimed that in the last month UK house prices have risen at the fastest pace in one month since the Truss budget. Average house prices are up 3.2% in the year to September. Given the historic heat of the UK property market one can see why REA wants to get a slice of the action. Another former Armchair Trader favourite Smoove, the previously AIM-listed property technology company was swallowed-up by another Australian property services company PEXA [ASX:PXA] for GBP30m at the close of last year.
D-day for REA
Today’s the day Rightmove needs to make its decision, having received a GBP6.2bn offer from REA which expires at 17:00. If Rightmove rejects the offer, which it has done so far, and REA doesn’t come back to the table with a better deal in the next few hours, the Australians will have to go away for at least six months, as an extension proposal has been rejected. Obviously Rightmove’s boardroom will be currently inundated with calls from its institutional investors, who, given the poor state of the markets might want to get a quick cash boost for their funds.
The current GBP6.2bn offer values each Rightmove share at GBP7.81. This is a significant move up from its GBP7.05 opening gambit at the start of the month. Could REA go further? When we last wrote about Rightmove, we were wondering whether Rightmove’s shares were due an uplift. At the time (15th November 2023) the property portal’s shares were trading at 512p. We noted that since IPO in 2007, Rightmove’s shares had risen over 1,100%. The company hit a high of 710p on 23rd September and opened the week at 645.24p rising to 653p within the first hour of trading, up 16.4% over one-year and up 15.8% since the beginning of the year. The company’s shares have ranged between 457.7p and 710p over a 52-week period, with the Rightmove’s market cap being GBP5.3bn.
We’ll know by this time tomorrow how this all shook down.
