The REA Group Ltd (ASX: REA) share price is down after announcing a further offer for UK business Rightmove.
REA Group owns realestate.com.au and various other property businesses in Australia. Rightmove operates a property portal in the UK.
Further increased offer for Rightmove
REA Group has now made a number of bids for the UK business.
The ASX share increased its offer of 16 September 2024 to the board of directors of Rightmove, which included cash and REA Group shares of an implied a total offer value of £7.49 per Rightmove share. This offer was rejected by Rightmove on 18 September, saying the offer fundamentally undervalued Rightmove.
This increased offer was 6.2% higher than the £7.05 per Rightmove share offer made on 5 September 2024.
Following on from that rejection, REA Group announced that over the weekend it increased its cash and share offer to £3.41 in cash and 0.0422 new REA Group shares. At the current share price and exchange rate, that implies a total offer value of £7.70. This is 2.8% higher than the last offer.
It also represents a 9.2% increase on the initial offer on 5 September 2024 and a 39% premium to the Rightmove share price on 30 August 2024 of £5.56.
If this offer is accepted, Rightmove shareholders would own approximately 20% of the combined business.
There is an upcoming deadline on 30 September 2024.
Management commentary
The REA CEO Owen Wilson said:
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. We live in a world of intensifying competition and this proposed transaction would bring together two highly complementary digital property businesses for investment and growth.
We have today increased our proposal to an implied value of 770 pence – it provides a combination of immediate value certainty in cash and at the same time gives Rightmove shareholders an increasing opportunity in core digital property and adjacencies where we have much expertise. We are genuinely disappointed at the lack of engagement by Rightmove’s Board and we strongly encourage the Rightmove Board to engage.
Final thoughts on the REA Group share price
REA Group seems very determined to acquire Rightmove, but the higher the price goes the less value that REA shareholders are getting.
The UK is a large market, so there’s plenty of potential for profit growth there. The question, how much value will REA need to give away to get the deal done?
REA doesn’t need this deal to go ahead to keep growing – it has a very exciting future with its market-leading presence in India. The business also has a very strong position in Australia, of course.
The REA Group share price is certainly not cheap, but I think it can rise in the future.
