REA Group (ASX:REA) is giving up its pursuit of Rightmove plc after its fourth cash and share offer was rejected.
REA confirms that it does not intend to make another offer for Rightmove.
In a very detailed (and passionately-worded) announcement this morning, the company reported Rightmove’s share price had lacked any sustained upward momentum for two years despite being supported by its ongoing share buyback programme and revised strategy announced at last year’s Capital Markets Day.
The offer
The Fourth Proposal, at an implied offer of 775 pence per share based on
REA closing price on September 27, plus a special
dividend of 6 pence per share, ‘together represented a 45% premium to Rightmove’s 12-month and 24-month volume weighted average share prices’.
“REA’s approach to Rightmove’s Board was driven by a clear strategic rationale and the opportunity to create a global and diversified digital property company, with strong margins and significant cash generation, underpinned by number one positions in Australia and the UK,” REA’s market announcement reports.
“REA believes the proposed combination would have provided Rightmove shareholders the opportunity to meaningfully participate in a fast growing, diversified, global leader whilst receiving value certainty in
an operating environment challenged by increased market competition.”
Deal depended on fair price
The announcement said REA was committed to its capital allocation framework with a disciplined approach to M&A.
The potential acquisition of Rightmove was dependent on coming to an agreement at
a fair price, which would have required meaningful engagement and a constructive dialogue.
REA claims lack of engagement
“The first substantive engagement provided by Rightmove was an introductory high-level Chairman-to-Chairman meeting which took place September 28,” the company reports today.
“At the REA Chairman’s request, this was followed by an additional meeting on September 29, where no presentation or any other information was given by Rightmove to REA.
“The lack of meaningful engagement and the consistent lack of information provided by Rightmove impeded the ability to progress discussions and work together towards a recommended transaction, within the timetable permitted.
“REA had firmly believed that it would have been in the interests of Rightmove shareholders for the Board of Directors of Rightmove to engage with REA and to extend the 30 September 2024 deadline to determine whether a mutually acceptable proposal could have been reached.
REA disappointed in Rightmove
“REA reiterates its disappointment that the Board of Directors of Rightmove were unwilling to do so, but REA is excited to pursue its many other avenues for growth.”
REA chief executive officer Owen Wilson, said the company approached Rightmove’s Board because it ‘believed’ in the opportunity to create a globally diversified leader in the digital property sector that would benefit both REA and Rightmove shareholders.
“We were disappointed with the limited engagement from Rightmove that impeded our ability to make a firm offer within the timetable available,” Mr Wilson said.
“They had nothing to lose by engaging with us.”
Looking ahead…
“We are always financially disciplined when we look at M&A and reinvestment in our business and will
continue to focus on the many other opportunities ahead of us.
“Our recent investment in Athena Home Loans is a great example of this.
“We have a clear strategy to expand in our core business and adjacent
markets, and India represents an exceptional opportunity for growth.
“We look forward to pursuing these
opportunities and generating further value for REA shareholders.”
REA last closed at $201.
You can join investors in the conversation here on HotCopper.
