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Australian real estate listed company REA Group said on Wednesday that Britain’s largest property portal Rightmove had rejected its 5.6 billion pound ($7.32 billion) cash and stock acquisition offer.
Rupert Murdoch’s News Corp, which owns 62% of REA, did not give any reason why Rightmove rejected the offer.
REA shares fell 1.25% in early trading Wednesday. Rightmove did not immediately respond to a request for comment from Reuters outside normal UK business hours.
Analysts at Jefferies said a deal would allow REA to accelerate growth in the lucrative international market, with the UK property market thought to be three times the size of Australia’s.
REA confirmed the discussions after the Australian company offered to pay a total of 705 pence per Rightmove share, a 27% premium to the British company’s closing price of 556 pence on August 30.
The offer, which consists of 305p in cash and 0.0381 new REA shares, is non-binding and is subject to due diligence.
REA said that if the transaction is completed, Rightmove shareholders will own approximately 18.6% of the combined group.
The cash portion of the deal will be funded by debt and existing cash, REA said. Analysts estimate that REA will need to issue about 30 million new shares as the equity portion of the deal, which could reduce News Corp.’s stake to about 50% of REA.
E&P analyst Entcho Raykovski said: “If it wants to move forward with the deal, REA’s option now is to make an offer directly to Rightmove shareholders, without board approval.”
He said REA could smooth the deal by adding a cash component, although that would likely require raising capital.
Raykovski added: “We see the merits of the deal but do not want to see REA increase the price to a level where the financial indicators are no longer attractive.”
REA said it would seek to apply for a secondary listing in London regardless of whether the deal would give it access to a wider range of investors.
