On Monday morning, shares of REA Group Ltd, the owner of realestate.com.au, have dipped again. At the time of writing, the stock is down by 1.5%, trading at $196.30.
Why Are REA Shares Falling?
Investors appear to be offloading REA shares following an update on the company’s proposed acquisition of Rightmove (LSE: RMV).
Earlier this month, REA Group made an offer consisting of 305 pence in cash along with 0.0381 newly issued REA shares. This offer valued Rightmove at approximately 705 pence per share, or GBP 5.6 billion (A$11 billion).
However, the market felt that the offer might be too generous, and Rightmove’s board agreed. The board swiftly rejected the proposal, calling it “opportunistic” and stating that it undervalued Rightmove’s potential.
The Latest Development
This morning, REA Group confirmed that it had returned with an improved, non-binding indicative proposal. On 16 September, the company submitted a revised bid, offering 749 pence per share — a 6.25% increase on its original offer.
Nevertheless, Rightmove’s board once again turned down the proposal on 18 September, reiterating that it fundamentally undervalued the UK-based property portal.
A Third Bid
Undeterred, REA Group came back with a third offer on 22 September. This time, the proposal included 341 pence in cash and 0.0422 REA shares for each Rightmove share. Based on REA’s current share price, this offer values Rightmove at 770 pence per share, translating to a total of GBP 6.1 billion (A$11.9 billion).
This latest offer represents a 9.2% increase from the initial bid and a 39% premium over Rightmove’s share price of 556 pence on 30 August. If accepted, Rightmove shareholders would hold about 20% of the combined entity.
REA’s CEO, Owen Wilson, expressed his disappointment over the lack of engagement from Rightmove’s board, stating:
“We believe that combining our expertise and technology with Rightmove’s successful platform would enhance the property experience for agents, buyers, and sellers. Despite intensifying competition, this transaction would create synergies that could fuel further investment and growth. We have increased our offer to 770 pence, which provides immediate value certainty while offering Rightmove shareholders the opportunity to participate in future growth.”
Will the Third Offer Be Accepted?
With this new offer on the table, REA Group is hoping for more meaningful discussions with Rightmove’s board. However, it remains to be seen whether the UK-based company will engage with REA on this updated proposal.
