Shares of Rightmove, the UK’s leading property portal, soared by 25% this morning following reports that Australian real estate giant, REA Group, is considering a takeover. Controlled by Rupert Murdoch’s News Corp, REA Group, a dominant force in Australia’s property and mortgage markets, has described the potential acquisition as a “transformational opportunity,” citing the “clear similarities” between the two companies.
Johan Svanstrom, CEO of Rightmove, has already identified mortgage services as a significant growth area for the UK platform, and REA’s ownership of Mortgage Choice, one of Australia’s largest mortgage brokers, could accelerate this expansion. Although REA has not yet made a formal offer, it confirmed its interest after news emerged of its collaboration with Deutsche Bank on a major international acquisition. This speculation sent Rightmove’s shares soaring, boosting the company’s market valuation to around £5.4 billion.
According to UK takeover regulations, REA Group now has until the end of September to either submit a formal offer or withdraw its interest. The acquisition could profoundly impact the UK property market, where Rightmove dominates with an 80% market share, outpacing rivals like Zoopla and OnTheMarket.
Earlier this year, Rightmove, a constituent of the FTSE 100 index, warned of a potential decline in its customer base in 2024 due to a downturn affecting estate agents and housebuilders. Despite these challenges, the company posted a 7% revenue increase in the first half of 2024, driven by higher spending on property listings. Beyond mortgage services, Svanstrom has identified rental properties and commercial real estate as key growth areas, investing in digital solutions to streamline the home-buying process.
However, while Rightmove shareholders celebrated the potential deal, REA investors reacted less favourably. REA Group’s shares fell 7% on Monday amid concerns about the equity raising likely needed to finance the acquisition. Despite this setback, REA’s stock has performed well over the past year, buoyed by the robust Australian housing market.
REA Group CEO Owen Wilson, who has led the company since 2018, was praised by stockbroker Angus Aitken as a “sensible” executive making a “common sense” acquisition, emphasizing that the move is driven by long-term returns rather than personal ambition.
Founded in a Melbourne garage in the mid-1990s, REA Group has grown significantly under News Corp’s ownership, now valued at AU$26 billion (£13.4 billion). News Corp first acquired a stake in REA in 2001, increasing it to 62% by 2005. This stake has been under scrutiny recently, with activist investor Starboard Value urging News Corp to separate its property holdings from its broader media business.
REA Group has previously ventured into the UK market, acquiring Propertyfinder in 2005 before selling it to Zoopla four years later. The company also has operations in India and holds a 20% stake in the US-based Move Inc. Despite recent divestments, including the sale of its European listings business in 2016 and its minority stake in PropertyGuru last month, REA maintains a significant global presence.
Of particular interest to UK mortgage intermediaries is REA Group’s acquisition of Mortgage Choice in 2021, marking its substantial entry into the mortgage industry. Integrated with REA’s Smartline broker franchise, Mortgage Choice now offers a wide range of financial services through over 940 brokers and 720 franchises across Australia. This expanded network strengthens REA’s portfolio and could provide a strong platform for its potential expansion into the UK through the Rightmove acquisition.
As the September deadline approaches, industry analysts and investors alike will be closely watching REA Group’s next moves, with the potential acquisition of Rightmove poised to reshape the real estate and mortgage markets in both Australia and the UK.