The prospective cost for News Corp’s 61%-owned REA Group (ASX:REA) to buy Rightmove in the UK has just risen well above A$11 billion.
This follows a surge in Rightmove’s shares, which climbed more than 27% to £5.59 billion, or A$11.01 billion, during trading in London. The property portal had been valued at £4.4 billion on Friday, with shares well below their 2021 highs.
AJ Bell investment analyst Russ Mould noted that it is easy to see why Australia’s REA Group would be interested in Rightmove. He highlighted the new Labour government’s pro-housing policies and its focus on improving the UK economy. In London on Monday, he said, “Rightmove is a unique asset on the UK stock market, and shareholders are unlikely to accept the first bid that comes along. It is the dominant property portal in the UK and should command a premium takeout price.”
At the closing value of A$11.01 billion, Rightmove would cost REA around 40% of its market valuation of A$27.4 billion.
If REA were to make a cash and share offer, it would need to find around A$5 to A$6 billion in cash, with the remainder covered by REA shares or securities. Unless it paid 61% of the purchase price, News Corp would face significant dilution and a loss of majority control.
There is also added interest in the deal involving News Corp and its US listings arm Move (20% owned by REA).
Back in early 2023, News Corp attempted to sell its 80% stake in Move to US property services group CoStar for a reported US$3 billion. CoStar balked at the price, and with its shareholders unhappy, the deal collapsed.
Earlier this year, CoStar completed a £100 million acquisition of the smaller UK listings group OnTheMarket from a group of UK real estate agent owners. This is a much smaller business than Rightmove and the number two group, Zoopla, which is owned by Houseful and, in turn, by US private equity giant Silver Lake Partners.
This is not the first time REA has been involved in the UK housing market. In August 2009, Zoopla acquired the PropertyFinder Group, which included Propertyfinder.com, Hotproperty.co.uk, and UK Property Shop, from REA Group and International (before the 2013 split in the Murdoch empire). The sale price was not disclosed.