REA group which owns Mortgage Choice gets ready to empty the piggy bank
UK real estate giant Rightmove is getting ready for a possible higher bid from Australian property group REA, following the rejection of a £5.6 billion takeover offer last week. REA, which is majority-owned by Rupert Murdoch’s News Corp and owns one of Australia’s biggest Mortgage Brokerages, had its initial bid described as "opportunistic" by Rightmove, which said it undervalued the company’s long-term growth prospects. Sources now suggest that a revised offer could come as early as this week.
The original proposal valued Rightmove’s shares at 705 pence each, a 27% premium over its pre-offer share price. However, the value dropped to 698 pence per share after REA’s stock slipped due to investor concerns in Australia. Rightmove, which dominates 80% of the UK property listings market, saw its share price rise 25% after news of the bid, giving the company a market cap of approximately £5.4 billion. Analysts believe that a new offer closer to £6 billion may be necessary to convince Rightmove's shareholders.
REA’s attempt to acquire Rightmove comes amid increased speculation about capital gains tax (CGT) reforms in the upcoming October budget. This has contributed to a surge in larger homes being listed for sale, as homeowners try to avoid potential tax hikes. Rightmove reported a 15% increase in listings for larger properties, such as four-bedroom detached homes and five-bedroom houses, with some regions, like the east and southwest of England, seeing over a 20% rise.
Rightmove’s rejection of the initial bid hasn't deterred REA, with its bankers at Deutsche Bank actively exploring ways to get the deal through. The acquisition would give REA a strong foothold in the UK market, which is three times larger than Australia’s, while allowing Rightmove to expand its mortgage and digital offerings—key growth areas identified by Rightmove CEO Johan Svanstrom.
However, REA’s investors have shown some hesitation. The company's stock fell by 7% following the takeover news, as concerns mounted over the potential need for equity raising to fund the acquisition. Some analysts, like Citi’s Siraj Ahmed, believe REA would need to offer a 40-50% premium to persuade Rightmove’s shareholders. There is also speculation that REA may increase the cash portion of the deal, although this could lower News Corp’s stake in REA.
In the background, private equity firms are reportedly circling Rightmove, which was formed in 2000 by estate agents Countrywide, Connells, Halifax and Royal and Sun Alliance. One source has suggested that PE firms would likely make cuts and sell the company, whereas REA says it is offering long-term investment. This difference could play a role in how shareholders view the competing options.
The timing of the bid also comes as the UK housing market shows signs of a rebound. Interest rates were cut from a 16-year high of 5.25%, and mortgage rates are expected to continue falling, boosting buyer confidence. According to Halifax, house prices hit a two-year high last month, while Rightmove has seen a 0.8% increase in asking prices for September, signaling renewed optimism among sellers.
REA has until September 30 to decide whether to make a formal bid or withdraw. Should they press ahead, the deal could reshape both the UK mortgage and property markets, as well as REA's global reach, which already includes operations in Australia, the US, and India.
Adding to the complexity is the ongoing succession drama at News Corp, with Rupert Murdoch reportedly planning to hand control of his media empire to his eldest son, Lachlan Murdoch. The REA deal is seen as one of Lachlan’s most significant business moves, dating back to his investment in the company in 2001, which has grown into one of Australia’s largest firms, valued at over £13 billion. Acquiring Rightmove would further cement his leadership role as Rupert Murdoch, now 93, gradually steps back from the family business.
However, the acquisition also raises questions about the future of Murdoch’s UK news outlets, which have struggled financially in recent years. Some speculate that acquiring Rightmove could provide a much-needed financial cushion for News Corp’s UK papers, including The Sun and The Times, which have seen declining profits.
REA’s ambitions to acquire Rightmove come at a critical time for the UK property market. With mortgage rates falling and the market beginning to recover from recent highs, both buyers and sellers are watching closely to see how this deal could reshape the future of UK real estate.
