Why are the Murdochs trying to buy UK property site Rightmove?
By Mark Sweney,
2024-09-06
Getting into property is considered to be Lachlan Murdoch’s shrewdest and most profitable contribution to building the family empire.
Shortly after the turn of the century, Rupert Murdoch’s eldest son persuaded News Corporation to take a 44% stake in REA Group, the owner of Australia’s realestate.com.au property website.
More than two decades on, the media baron’s favoured son could be about to repay his father’s recent move to hand him full control if a takeover of Rightmove, the UK’s leading property website, succeeds. Doing so could fulfil the 94-year-old’s desire to protect his beloved news media legacy in the UK.
REA Group, which is majority owned by News Corp, has until the end of the month to “put up or shut up” and table a deal analysts think could be in excess of £5bn in cash and shares for Rightmove, which controls more than 80% of the UK market.
“This is a way for News Corp to protect its weakening news properties in the UK,” said one former executive. “Too many are loss-making or near loss-making businesses and they need a way to find growth and protect their UK news holdings.”
The Sun, which is still battling with the fallout of the phone-hacking scandal, lost £66m last year and its online audience dropped by 4 million.
And the group’s radio and television arm lost nearly £54m , mainly driven by the cost of running the rightwing news channel TalkTV, which has lost its lead TV presenter Piers Morgan and gone online-only amid low ratings.
Despite the challenge of a declining print market News UK reported that the Times and the Sunday Times had recorded a profit of almost £61m and had 600,000 digital subscribers at the end of June.
Overall, profits at News Corp’s news media division, which includes its papers in the UK, US and Australia, contracted by 23% in the year to the end of June.
However, while the addition of Rightmove would create a financial cushion for the UK papers, Lachlan’s ultimate loyalty to legacy media has always been in doubt.
In recent years, Rupert Murdoch has been forced to reshape his empire in the face of global competitive pressure.
The timing of the potential move on Rightmove is opportunistic; the company is considered undervalued and profits are expected to rise in the coming years as the UK property market rebounds .
However, it comes on the heels of an attempted radical change in the supposedly irrevocable family trust that controls the family empire.
Currently, the trust would hand control to the four eldest children when he dies, giving the younger brother James, sister Elisabeth and half-sister Prudence a say in how the companies are run.
Murdoch argues that Lachlan’s conservative political beliefs are essential to maintaining the value of the right-leaning media company.
In June, a Nevada probate commissioner found that the family trust can be rewritten if Murdoch can prove he is acting in good faith to protect the value of the trust’s holdings.
Strengthening the UK commercial operations may not have any bearing on the grounds or outcome of the legal action, but the family patriarch is a newspaper man through and through.
In return for making his latest move to ensure Lachlan has full control of the family empire, his eldest son can now in return deliver a secure financial safety net for the UK papers.
In the mid-1990s the ever-astute Rupert was quick to realise the devastating impact the internet would ultimately have on the immense newspaper classified advertising industry.
Online property is a natural fit for a newspaper business to strategically understand, albeit with limited operational synergies
“It is the type of diversification that Rupert has always been interested in,” said McCabe “He tried to set up the first pan-newspaper owner online classified service. The classified market in general is one newspaper owners feel comfortable with; there is a heritage and history to this, and businesses here such as Daily Mail & General Trust and the Guardian have done well out of it. Lachlan sniffs an opportunity here.”
After news of a potential bid by REA, Peel Hunt analysts have said that Rightmove is the “cheapest publicly listed classifieds businesses in Europe”.
Lachlan’s property play dates back to 2001 when he swooped on the struggling REA in Australia, taking a 44% stake for A$2m, and increased News Corp’s stake to 62% in 2005 after a takeover deal fell through.
The company is now worth A$26bn (£13.2bn) and News Corp’s overall digital real estate services division, which includes operations in the US, accounted for a third of total global profits of $1.5bn in the year to the end of June.
However, previous efforts to expand the property strategy to the UK have not come off.
After a failed attempt in 2005 – when the parent of the Times and the Sun went in with REA to buy Propertyfinder, which it reportedly sold to Zoopla at a loss four years later – the Murdochs and UK top brass seriously looked at making a move on one of the leading UK property aggregators again about a decade ago.
However, Rightmove was considered too expensive, and while a lot of time was spent looking at Zoopla, specifically its uSwitch subsidiary, as well as OnTheMarket, no moves were made.
“This is about stabilising the UK news business,” said a source. “I doubt Lachlan is looking at building and selling the property arm as an activist investor pushed for last year . He wants to scale up so you have to imagine this is a move to bulk up the UK business with the successful strategy of having real estate sites in each of their core markets. It is the gap they have always wanted to fill.”
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