REA Group's (ASX:REA) Third Takeover Bid for Rightmove Falls Flat, Shares Decline

September 23, 2024 01:09 PM AEST | By Team Kalkine Media

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REA Group's (ASX:REA) Third Takeover Bid for Rightmove Falls Flat, Shares Decline — Image source: Shutterstock

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Shares of REA Group Ltd (ASX:REA) continued their downward trajectory on Monday, dropping 1.5% to AU $196.30 amid ongoing challenges in its pursuit of acquiring Rightmove (LSE:RMV). This marks another setback for the property listings company, which has made multiple attempts to secure the British real estate platform.

REA Group’s latest troubles stem from its recent announcement regarding a proposed takeover of Rightmove. Earlier this month, REA made an initial offer of 305 pence in cash and 0.0381 new REA shares, valuing Rightmove at approximately £5.6 billion ($11 billion). However, this proposal was swiftly dismissed by Rightmove's board, which deemed the offer "wholly opportunistic and fundamentally undervalued" the company’s potential.

In response to this rejection, REA increased its bid to 749 pence per share, representing a 6.25% increase over the initial offer. Unfortunately for REA, this second proposal was also turned down, with Rightmove’s board reiterating that it did not adequately reflect the company’s value.

Despite these setbacks, REA Group remains undeterred. On September 22, the company announced a third offer, consisting of 341 pence in cash and 0.0422 new REA shares, which translates to an implied value of 770 pence per share. This latest proposal represents a 9.2% increase from the original offer and a substantial 39% premium over Rightmove's undisturbed share price of 556 pence on August 30.

REA Group’s CEO, Owen Wilson, expressed disappointment at Rightmove’s lack of engagement. He emphasized that the merger would leverage the strengths of both companies to enhance the experience for agents, buyers, and sellers. “We believe that the combination of our world-leading expertise and technology with the attractive Rightmove business will create an enhanced experience for agents, buyers, and sellers of property,” Wilson stated.

As the situation stands, REA’s attempts to acquire Rightmove face significant obstacles. Investors appear cautious, reflecting concerns that the company may be overextending itself in its quest for expansion. While the prospect of combining two prominent digital property businesses is appealing, the failure of previous proposals may cast doubt on the feasibility of the current offer.

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