By Scott Murdoch and Aditya Govindrao
SYDNEY (Reuters) – Britain’s biggest property portal Rightmove has rejected its offer to buy the Australian property listings company for 5.6 billion pounds ($7.32 billion) in cash and shares, the Australian property listings company Ria Group said on Wednesday.
REA, in which Rupert Murdoch’s News Corp (NASDAQ:) owns a 62% stake, did not give any reason for rejecting the offer from Rightmove.
REA shares were down 1.25% in early trading on Wednesday. Rightmove did not immediately respond to a Reuters request for comment, which was sent outside normal UK business hours.
The UK housing market is three times larger than Australia’s, according to Jefferies analysts, and the deal would have allowed REA to accelerate growth in lucrative international markets.
The Australian company had offered to pay a total of 705p per Rightmove share, representing a 27% premium to the UK company’s closing price of 556p on August 30, after which AE confirmed the discussions.
The offer consisted of 305p in cash and 0.0381 new REA shares, was non-binding and subject to due diligence.
REA said that if the deal had gone through, Rightmove shareholders would have owned around 18.6% of the combined group.
The cash portion of the deal was to be financed through debt and existing cash, the IAEA said.
Analysts estimated that REA would need to issue about 30 million new shares for the equity portion of the deal, which could reduce News Corp’s stake in REA to about 50%.
“If REA wants to continue pursuing the deal, its options now are to make the offer directly to Rightmove shareholders without board approval,” said analyst Intcho Rajkowski.
He added that REA could sweeten the deal by increasing the cash component, although that would require raising capital.
“We see merit in the deal but we do not want to see REA increase the price to a level where the financial metrics are no longer attractive,” Raikowski added.
REA said it would look to apply for a secondary listing in London regardless of whether the deal would give it access to a wider group of investors.
(1 dollar = 0.7645 pounds)
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