Why the Onthehouse Holdings Ltd share price is rocketing today

Credit: Alex Livet

Shares in digital real estate business Onthehouse Holdings Ltd (ASX: OTH) are 15.2% higher today after the company revealed that a consortium backed by investment bank Macquarie Group Ltd (ASX: MQG) has made an improved takeover bid for the business.

After management at Onthehouse rejected a 75.5 cents per share takeover bid made last December a new all cash consideration of 85 cents per share has been tabled that is now under the consideration of the Onthehouse board.

Today shares in Onthehouse responded to the news by lifting 15% to 79.5 cents, which suggests the market is unconvinced the deal is a racing certainty as the exchange traded price is still around 7% below the offer price.

At its half-year results presentation in February, Onthehouse announced the proposed sale of its loss-making residential property website, while its real estate solutions business continues to perform moderately well. However, the residential property website appears to have been muscled out of the market by the growth of big-hitting rivals in Fairfax Media Limited’s (ASX: FXJ) and REA Group Limited’s (ASX: REA)

It’s Onthehouse’s profitable and growing real estate solutions business that provides software and data solutions to Australia’s real estate agents that is attractive to its suitors. Notably, it’s two directors of Onthehouse who are behind today’s renewed takeover bid, while the backing of Macquarie is also mysterious as Onthehouse hardly looks a classic takeover target for the investment bank.

The real estate solutions business could though be an attractive target for the Fairfax Media Group that is looking to invest heavily in its asset ahead of a potential initial public offer within a couple of years’ time.

If I were an Onthehouse shareholder I would be inclined to sell my shares at the market price as today’s proposed new deal may yet fall through, and I think there are far better tech investment opportunities available on the ASX.

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

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