Australian real estate company, REA Group announced that it would not be pursuing a purchase of the portal after the UK’s Rightmove property, owned by Johan Svanstrom, turned down a fourth takeover offer.
REA stated that it takes a “disciplined approach” to mergers and acquisitions and that reaching a “fair price” agreement was a prerequisite for making a bid for Rightmove.
“We were disappointed with the limited engagement from Rightmove that impeded our ability to make a firm offer within the timetable available. They had nothing to lose by engaging with us,” REA’s CEO Owen Wilson said.
Meanwhile, Rightmove released a separate statement stating that the fourth offer proposal from REA Group was unanimously rejected by the company’s board because it “materially undervalued Rightmove and its prospects.”
“Rightmove’s standalone strategic plan would better serve the interests of shareholders,” it continued.
According to Rightmove, the offer, which was made for 346 pence in cash and 0.0417 new REA shares, suggested a value increase of 10 pence, or 1.3%, over the previous third proposal. Recently, Rightmove shares were down eight points, or 3.3%.
Based on REA Group’s closing price in September 2024, the latest offer from REA Group suggested a total offer value of 780p.
Murdoch’s News Corp-owned Australian real estate listings company first revealed it was considering acquiring Rightmove. It made an initial offer of 5.6 billion pound before launching its final bid, which was estimated by Reuters to be around 6 billion pound (USD 8.1 billion).
The British company had pushed Melbourne-based REA Group to submit a final proposal to put an end to the uncertainty surrounding the bidding process, prior to REA Group confirming it was dropping its proposals for Rightmove.
“The last few weeks have been very disruptive, as well as unsettling for our colleagues,” Rightmove’s Chair Andrew Fisher said.
News Corp owns more than 61% of the REA Group, which runs several brands in the United States and India and several property websites in Australia.
There was strong market pressure on the company’s previous UK venture. Amid the global financial crisis in 2009, the company sold its real estate website, PropertyFinder Group, to rival Rightmove.
Meet Johan Svanstrom: The CEO Of Rightmove
Johan Svanstrom has years of experience serving as a board director for both public and private technology companies across several nations. He also brings a wealth of knowledge about expanding established online marketplace and e-commerce businesses.
He most recently worked for the international investment firm EQT as a Partner in the Growth Advisory Team, where he participated in investments in and sat on the boards of multiple growth technology companies.
Before that, Johan Svanstrom led teams across four continents as Global President of Hotels.com and Expedia Affiliate Network brands for the Expedia Group from 2013 to 2018. During that time, he increased sales to over USD 3 billion.
Before that, he worked as a Managing Director for eight years in the Asia-Pacific division of the Expedia Group, where he launched and developed multiple business divisions into significant regional players. Johan Svanstrom, who hails from Sweden and currently resides in the United Kingdom, has a Master’s degree in Economics from the Stockholm School of Economics.
During his tenure at McDonald’s Corporation, he served as the Head of Digital Innovations Group, leading notable projects that were headquartered in the US.
Before joining McDonald’s, Johan Svanstrom held executive positions in telecommunications and internet start-ups. After rejecting REA Group’s takeover attempts, Johan Svanstrom-led property portal assured its investors that it was confident about delivering even greater financial returns through its operations. As a result, agents may face higher listing fees.
The Rightmove board concluded that the UK property portal was “unattractive and materially undervalued” by REA’s proposals, and as such, the board could not recommend them to shareholders.
Making Sense Out of the Failed Bid
As per a Guardian report, Rupert Murdoch’s eldest son Lachlan wanted to get into the property sector for the sole purpose of not only expanding the media mogul’s family empire, but making it profitable as well. News Corporation, in 2001, took over a 44% stake in REA Group, the owner of Australia’s realestate.com.au property website.
Lachlan reportedly envisioned the Rightmove takeover as an avenue to fulfil his 94-year-old father’s desire to protect his beloved news media legacy in the United Kingdom.
“Success would fulfil a long-running obsession to bolt a successful property business onto the UK operation, as News Corp has done with great success in Australia and the US, adding a cash cow to support its businesses operating in the increasingly under-pressure media world,” Guardian reported.
“This is a way for News Corp to protect its weakening news properties in the UK. Too many are loss-making or near loss-making businesses and they need a way to find growth and protect their UK news holdings,” said a former executive of Murdoch’s media empire, while speaking to the British publication.
The Sun, which is still battling with the fallout of the phone-hacking scandal, lost 66 million pound in 2023 last and its online audience dropped by 4 million. The group’s radio and television arm lost nearly 54 million pound, mainly driven by the cost of running the right-wing news channel TalkTV, which has lost its lead TV presenter Piers Morgan and gone online-only amid low ratings.
“Despite the challenge of a declining print market News UK reported that the Times and the Sunday Times had recorded a profit of almost 61 million pound and had 600,000 digital subscribers at the end of June. Nevertheless, some News Corp investors have argued that the parent company could be worth more than USD 25 billion (19 billion pound), but is languishing at USD 15 billion because of the drag of its weakest publishing assets,” the report added.
Profits of News Corp contracted by 23% by the end of June 2024. The addition of Rightmove, as per the analysts, would have created some sort of a financial cushion for News Corp’s UK business.
Rupert Murdoch has been reshaping his media empire in the face of global competitive pressure. In 2017, Disney acquired his 21st Century Fox entertainment business for USD 71 billion, while a year later he was forced to relinquish control of Sky after being outbid by Comcast’s 30 billion pound offer.
A Rightmove deal would have resulted in News Corp completing its goal of having property operations in its three core markets. This could have further prompted Lachlan to consider the push made in 2023 by the activist investor Starboard Value for the company to sell its property division to improve News Corp’s market value.
Rightmove is often considered undervalued and profits are expected to rise in the coming years as the British property market rebounds. However, not everything is well with the Murdoch family. In July 2024, reports emerged about Rupert being engaged in a legal battle to secure Lachlan sole control of the family’s investments, which include the US TV company Fox, the Wall Street Journal, the New York Post and the Australian as well as the UK titles.
Strengthening the UK commercial operations may not have any bearing on the grounds or outcome of the legal action, but Lachlan reportedly saw the Rightmove acquisition as an avenue to secure a financial safety net for his family empire’s UK-based newspaper businesses.
And this was not a bad move, as per Douglas McCabe, the chief executive at Enders Analysis, who points to the success enjoyed by the owner of the Daily Mail’s investment in Zoopla, and the Guardian’s former ownership of AutoTrader.
“It is the type of diversification that Rupert has always been interested in. He tried to set up the first pan-newspaper owner online classified service. The classified market in general is one newspaper owners feel comfortable with; there is a heritage and history to this, and businesses here such as Daily Mail & General Trust and the Guardian have done well out of it. Lachlan sniffs an opportunity here,” McCabe said further.
Peel Hunt analysts have termed Rightmove as the “cheapest publicly listed classifieds businesses in Europe”.When it comes to property sector-related investments, Lachlan is not a newbie. In 2001, he swooped on the REA (as it was struggling in Australia), taking a 44% stake for 2 million Australian dollars, and increased News Corp’s stake to 62% in 2005 after a takeover deal fell through.
The company is now worth 26 billion Australian dollars (13.2 billion pound) and News Corp’s overall digital real estate services division (including operations in the United States) accounted for a third of total global profits of 1.5 billion USD in the year to the end of June.
However, previous efforts to expand the property strategy to the United Kingdom have not come off.
“After a failed attempt in 2005, when the parent of the Times and the Sun went in with REA to buy Propertyfinder, which it reportedly sold to Zoopla at a loss four years later, the Murdochs and UK top brass seriously looked at making a move on one of the leading UK property aggregators again about a decade ago,” the report added.
“However, Rightmove was considered too expensive, and while a lot of time was spent looking at Zoopla, specifically its uSwitch subsidiary, as well as OnTheMarket, no moves were made. This is about stabilising the UK news business. I doubt Lachlan is looking at building and selling the property arm as an activist investor pushed for last year. He wants to scale up so you have to imagine this is a move to bulk up the UK business with the successful strategy of having real estate sites in each of their core markets. It is the gap they have always wanted to fill,” said a source.
Image Credit: plc.rightmove.co.uk