REA Group Eyeing the UK?

Hey Superheroes,

Global markets haven’t exactly walked into September with their best foot forward, with both the S&P 500 and the ASX down for the week.

Despite the Fed being expected to begin cutting interest rates this month, upcoming jobs and payroll data due later today seem to be keeping investors on their toes. 

Closer to home, Australia’s GDP grew just 0.2% in the June quarter. With inflation coming in higher than expected at 3.8%, markets may be catching wind that the RBA may keep borrowing costs higher for longer.

Whatever happens, trust us to keep you updated! Let’s jump into this week’s stories.

REA Group eyeing British property market with potential A$8.5B takeover

Whether it’s weaker local growth or just massive ambitions, companies may be enticed to expand operations outside their local country. 

REA Group (ASX: REA), which operates realestate.com.au and realcommercial.com.au and is controlled by Rupert Murdoch’s News Corp, shared news that it’s shopping around in the UK. 

💸 Is Rightmove the right move?

REA Group announced this week that it’s considering a takeover of Rightmove, the UK’s largest property platform listed on the LSE. 

REA showed interest in Rightmove after citing “clear similarities” and a “transformational opportunity” that would allow it to grow into a global empire. 

Although the two companies hadn’t had any discussions yet, Rightmove shareholders enjoyed a 25% increase in the value of their shares following the announcement. REA Group shareholders meanwhile lost as much as 6% of their share value for the day. 

By publicly expressing interest in the deal, UK takeover laws require that REA Group either submit an offer or walk away by the end of September. 

🔥 Interest rate cuts fueling UK markets

Perhaps REA Group is also considering the potential in UK markets.

The Bank of England cut interest rates last month for the first time since COVID-19. This makes it cheaper for households to borrow money – money which could be put to good use buying property. 

Rightmove took this opportunity to showcase data indicating that the number of potential home buyers since the cut jumped by 19% compared with the same time a year ago. 

📊Looking into Rightmove’s numbers

Rightmove’s revenues for the first half of the year increased 7% year-on-year as both agents and new home developers renewed contracts, upgraded their packages and invested in additional products.

The company enjoys a majority market share of 86%, although it may soon face renewed competition from rival OnTheMarket, which was acquired by CoStar Group (NASDAQ:CSGP) at a valuation of £99 million in December 2023.

Rightmove’s market cap sat at £4.34 billion (~A$8.5B) prior to REA Group’s announcement. This has since grown to £5.19 billion (~A$10.2B), which may make REA’s takeover a teeeeny bit more expensive.

🌏 REA Group’s global portfolio

Interestingly, REA Group has already experienced the UK’s markets.

The company previously owned UK-based PropertyFinder Group, which it later sold to Rightmove’s rival Zoopla in 2009 off the back of the GFC.

Since then, REA Group has managed to find other pockets of growth in India and Southeast Asia. 

Revenues for REA India had grown 31% year-on-year contributing A$103.1 million of the group’s consolidated A$1.45 billion in revenue for FY24.

PropertyGuru Group (NYSE:PGRU), an operator of leading property sites in Southeast Asia, which REA owns a 17% stake in, also delivered 12% year-on-year revenue growth. Do note however that REA Group’s stake in the business is set to be sold off in the next few quarters. 

REA Group also owns minority shareholdings in U.S.-based Move Inc, which operates Realtor.com. However, the company revenues declined 10% over the same period as U.S. existing home sales fell.

We will know by month end, whether or not REA Group enters the UK markets.

🔦  Some other things we’re shining the Spotlight on:

• TPG TELECOM’S REACH: TPG Telecom’s network size is set to double after inking a A$1.59B infrastructure and network sharing deal that the ACCC approved on Thursday. The regulator had earlier blocked a similar deal between TPG and rival telecom firm Telstra.
• ROBINHOOD CRYPTO FACING SETTLEMENT: The crypto platform run by Robinhood is set to pay US$3.9M to settle claims it failed to let customers withdraw cryptocurrency from 2018 to 2022. Customers were also misled about where the assets were held, with the settlement also requiring the platform to let customers withdraw crypto assets to their own wallets.
• BLACKSTONE TO BUY AIRTRUNK: The A$24 billion purchase of the Australian data centre group would be Blackstone’s largest investment in the Asia-Pacific region. The asset manager is set to acquire AirTrunk from Macquarie Asset Management and the Public Sector Pension Investment Board, subject to the approval of the Australian Foreign Investment Review Board.

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