Rightmove PLC (LSE:RMV) shares plunged 11% following news of a takeover bid for its rival OnTheMarket PLC (AIM:OTMP) from US peer CoStar.
Analysts said the move will ratchet up competition in the UK, as well as remove a potential bidder for the online property portal.
Shares in OnTheMarket jumped 53% after the agreed 110p a share offer, which values it at £99 million, but Rightmove tumbled 11% to 512.80p on the news.
The entrance of CoStar adds a major new competitor for Rightmove and Zoopla in the UK market.
Broker Citigroup sees CoStar’s move as bad news for Rightmove on a number of fronts.
Firstly, it believes there had been some hope Righmove could be one of the M&A targets for CoStar, pointing out shares are 7% higher since comments from CoStar's chief executive earlier this month that the US group planned to allocate a portion of its US$9 billion 'war chest' to consolidating European property portals.
This is now unlikely given the acquisition of OnTheMarket and given Rightmove's dominance of the UK market, in Citi's opinion.
Secondly, CoStar has firepower (US$450-500 million free cash flow per annum), so Rightmove could face more intense competition in residential and other areas - especially given CoStar's strength in commercial.
Citi keeps a 'sell' rating on Rightmove.