REA: Making the right move?

Rea (ASX:REA) is an online property portal business. The primary component of the business is the online property portal realestate.com.au which dominates the Australian property online listing market. They also own 78% of the largest property portal in India. In addition they own 20% of Move Inc. in the USA.

They did own 17.3% of PropertyGuru (NYQ:PGRU) which is a property portal in Southeast Asia, but sold that investment as part of a private equity buy out, realising a capital gain of A$150 million.

As part of their ambition to be a global leader in online property portals, they recently announced a takeover proposal for the UK’s largest property portal, the LSE listed Rightmove (LON:RMV). The indicative non-binding offer to take over Rightmove is for 305 pence in cash and 0.0381 new REA shares for each RMV share. That equates to a total of 705p per RMV share as at the date the offer was made.

Were the offer to be successful, Rightmove shareholders would hold approximately 18.6% of the combined group’s issued share capital. REA said they would seek a dual listing on the LSE should the deal succeed. Rightmove’s board of...