By Rishav Chatterjee and Aaditya GovindRao
(Reuters) -REA Group, the property listings company majority owned by News Corp, is considering buying Rightmove to create a global real estate company, the Australian firm said on Monday, sending the British housing portal's shares soaring.
Shares in London-listed Rightmove surged 24% to 6.89 pounds, their highest level since March 2022, and the stock was the top percentage gainer on the FTSE 100 index. The company declined to comment.
Britain's largest property portal Rightmove had a market value of 4.36 billion pounds ($5.73 billion) as of Friday's close. It makes money from listing real estate agents on its website.
Analysts at Investec in a note agreed with REA that the offer and the enlarged group presents a highly attractive investment opportunity, given an easing interest rate environment in the U.K. and recent new investment starting to pay off.
Shares of REA, in which the Murdoch family controlled media firm News Corp owns a more than 61% interest, closed 5.3% lower at A$207.4, one of the day's biggest losers on the benchmark.
If the deal goes through, it would be the largest so far this year in which an Australian firm buys an overseas company, data from LSEG showed. It would also be among the largest deals for a UK-listed company this year.
REA said it was considering a possible cash and share offer for Rightmove. It, however, said it had neither approached nor held talks with Rightmove.
REA now has until Sept. 30 to make a formal offer for Rightmove or walk away under UK takeover rules.
"Despite the potential long-term benefits of a strategic acquisition, the takeover move suggests capital vulnerability and risks," Junvum Kim, Saxo Asia Pacific senior sales trader at Saxo Markets, said in regard to the potential deal for REA.
A deal would boost growth for REA, the largest player in Australia's online property space which has already developed a foothold in Asian countries including India.
Rightmove, on the other hand, has benefited from the strength of its lettings business amid a prolonged weakness in the home sales market.
Jefferies analysts point out that the UK housing market is thrice the size of the Australian market and Rightmove is a highly profitable business that generates large volumes of buyer and seller leads that would help reduce operational costs.
Rightmove will be hoping to gain on the home sales front as an ease in interest rates is expected to revive homebuyer demand.
The British housing sector has witnessed some big deals and takeover attempts this year as homebuilders seek to build up their land holdings.
The London-based company's core business also generates revenue through advertising, and accounts for about 90% of overall revenue.
The British company has been under pressure to retain its UK market share after U.S. real estate firm Costar last year agreed to buy Rightmove's smaller domestic rival Onthemarket.
Peel Hunt analysts said Rightmove's trading price to earnings ratio made it one of the cheapest publicly listed classified groups in Europe.
Shares in German digital real estate platform Scout24 gained over 3%, while British cars marketplace Auto Trader Group rose 1%.
($1 = 0.7613 pounds)
($1 = 1.4765 Australian dollars)
(Reporting by Aaditya Govind Rao and Rishav Chatterjee in Bengaluru; Additional reporting by Aby Jose Koilparambil; Editing by Subhranshu Sahu, Christopher Cushing and Sharon Singleton)
Most Popular
Comments / 0