Earlier this month, Australia's REA Group, largely owned by News Corp, announced it is considering acquiring UK-based property portal Rightmove. This potential deal has boosted Rightmove's shares by 24%, reaching their highest value since March 2022, and positioned the company as the top gainer on the FTSE 100 index. Rightmove, valued at GBP 4.36 billion, generates most of its revenue from property listings and advertising. Analysts view the deal as a strong investment opportunity amid easing UK interest rates. REA, which has until September 30 to formalize an offer, could create a global real estate powerhouse. Despite REA's stock falling 5.3%, Rightmove remains profitable, supported by its thriving lettings business.
Earlier this month, REA Group, an Australian property listings company largely owned by News Corp, announced it is contemplating the acquisition of Rightmove. This move could potentially establish a global real estate giant, leading to a significant surge in Rightmove's share prices.
Shares of Rightmove, listed in London, jumped 24% to GBP 6.89, marking their highest value since March 2022. This surge made Rightmove the leading percentage gainer on the FTSE 100 index. The company chose not to comment on the situation. As of Friday's close, Rightmove, Britain's largest property portal, had a market value of GBP4.36 billion (USD5.73 billion). The company generates revenue by listing real estate agents on its website.
In a note, analysts at Investec concurred with REA, suggesting that the proposed offer and the expanded group represent a highly attractive investment opportunity. This is particularly promising given the easing interest rate environment in the U.K. and the recent returns on new investments. Shares of REA Group, in which the Murdoch family-controlled media firm News Corp holds over a 61% stake, closed 5.3% lower at USD 207.4, making it one of the biggest losers on the benchmark for the day.
If the deal proceeds, it would be the largest acquisition by an Australian firm of an overseas company so far this year, according to data from LSEG. It would also rank among the largest deals involving a UK-listed company in 2024.
REA stated that it is considering a potential cash and share offer for Rightmove. However, it clarified that it has neither approached nor initiated discussions with Rightmove. Under UK takeover rules, REA has until September 30 to either submit a formal offer for Rightmove or withdraw from the process.
Junvum Kim, senior sales trader at Saxo Markets for Saxo Asia Pacific, commented on the potential REA deal, stating, "While there may be long-term strategic benefits, the takeover move indicates capital vulnerability and associated risks." The deal would enhance growth for REA, Australia's leading online property platform, which has already established a presence in several Asian markets, including India.
Rightmove, meanwhile, has benefited from the strength of its lettings business, despite the ongoing weakness in the home sales market. Jefferies analysts highlight that the UK housing market is three times the size of Australia's, and Rightmove is a highly profitable business that generates substantial buyer and seller leads, which could help REA reduce operational costs.
Rightmove is hoping to see gains in the home sales market, as an anticipated easing of interest rates is expected to revive homebuyer demand. The British housing sector has seen several major deals and takeover attempts this year, as homebuilders look to expand their land holdings. The London-based company's core business also generates revenue through advertising, which accounts for approximately 90% of its total revenue.
The British company has faced pressure to maintain its UK market share following U.S. real estate firm Costar's acquisition of Rightmove's smaller domestic rival, On the market, last year. Peel Hunt analysts noted that Rightmove's trading price-to-earnings ratio makes it one of the most affordable publicly listed classified groups in Europe. Shares in the German digital real estate platform Scout24 increased by more than 3%, while British car marketplace Auto Trader Group saw a 1% rise.
REA Group's potential acquisition of Rightmove could forge a global real estate leader, highlighted by Rightmove's 24% share surge to GBP 6.89, its highest since March 2022. Analysts see the deal as a strong investment, buoyed by favourable UK interest rates. REA, which has a deadline of September 30 to formalize its offer, faces a challenge as its own shares fell 5.3%. The UK housing sector remains active with significant deals, while Rightmove's robust lettings business continues to perform well amid a sluggish home sales market.
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