This morning, Rightmove announced that it had formally rejected a £5.6bn takeover bid from Rupert Murdoch-owned property company REA group on 2 September.
The property portal confirmed it had received an “unsolicited, non-binding and highly conditional proposal” from REA at 698p, which represented a a premium of 26 per cent to Rightmove’s share price on 30 August.
The indicative offer was at 305p a share in cash and 0.0381 new REA shares.
The price was based on REA’s stock price as of 10 September.
The board said that REA’s offer was “wholly opportunistic and fundamentally undervalued Rightmove and its future prospects”.
Accordingly, it chose to reject the proposal unanimously.
Shares in Rightmove, jumped nearly 25 per cent last week after it emerged that the Australian property giant was considering a takeover bid for the FTSE company.
Last week, REA said in a statement that it could “apply its globally leading capabilities and expertise” to improve both companies, and that the takeover would “unlock value for both Rightmove and REA shareholders by creating a global and diversified digital property company”.
A tie-up between the two could significantly reshape the online property market across two continents, and create a global leader in real estate. If completed, it would mark the largest outbound transactions from Australia this year.
“The proposal combines certainty of value, in cash, at a significant premium to recent trading while at the same time giving Rightmove shareholders the opportunity to benefit from the future value creation of the combined business,” REA said.
Under the City code, REA must announce a firm intention to make an offer for Rightmove by 30 September.
Jeffries analysts believe that REA will eventually make a formal bid for Rightmove.
This week, they upgraded their rating for the portal from ‘underperform’ to ‘hold’, citing a “meaningful likelihood” that REA will follow through with its bid.
Jefferies analysts said although there is “limited” industrial and strategic logic for REA to buy Rightmove, the financial appeal is “compelling” as REA’s premium equity and debt-free balance sheet, puts it in a prime position for a low-risk deal.
“The financial rationale appears stronger than the strategic case,” they wrote. “We still think Rightmove has structural challenges, but the price action tells a powerful story.”