Rightmove PLC (LSE:RMV)’s unbudging unwillingness to accept the four offers tabled by Rupert Murdoch’s REA Group is the right course for management to take, reckon Peel Hunt analysts.
Rightmove rebuffed REA’s fourth bid at a £6.2 billion valuation on Friday, leaving REA with little hope of getting a deal over the line before 30 September deadline.
“In our view, Rightmove can achieve its ambitions to expand adjacencies without REA’s support,” said Peel Hunt.
“Given that we do not believe REA can further stretch itself with a higher offer price, and considering REA’s shares have been on a declining trend since the start of the bid process, we believe the 775p price is not guaranteed, due to the share component of the offer.”
REA’s latest offer comprises a 55% equity component. Any further offer is unlikely to include more equity given the dilutive effect on existing REA shareholders, analysts surmised.
Furthermore, increasing the cash offer will overshoot REA’s leverage targets, leaving Murdoch’s company stuck between a rock and a hard place.
“All things considered, we believe Rightmove should reject the bid and let the 30 September deadline lapse, to eliminate the volatility in its share price,” said Peel Hunt.
However, the prospect of REA Group launching a hostile takeover bid lingers.
Today, REA urged Rightmove to “engage now” while warning that it is in discussions with Rightmove’s shareholders.
“While the Rightmove board has refused to meet with us, we have enjoyed the opportunity to connect with Rightmove shareholders and to share our vision for the combination of the no. 1 digital property businesses in the UK and Australia,” said REA boss Owen Wilson.