We may be rapidly approaching Christmas, but the management team of REA Group Limited (ASX: REA) are working as hard as ever.
Hot on the heels of Monday's shock announcement with National Australia Bank Ltd. (ASX: NAB), the owner and operator of realestate.com.au revealed last night that it has sold two of its European businesses.
Oakley Capital Private Equity will pay €132.6 million ($189.7 million) on a cash and debt free basis for the atHome Group and REA Italia. Management estimates the profit on the transaction to be €115.2 million ($164.8 million) subject to final completion adjustments.
REA Group's CEO Tracey Fellows explained the reason for the sale:
"We were approached by multiple parties interested in our European businesses and took the opportunity to look at where we could make the greatest impact and optimise return for our shareholders. The transaction announced today with Oakley Capital enables us to further sharpen our focus in our key growth areas in the Australian, Asian and North American markets."
The deal seems to make a lot of sense in my opinion and I would expect the market to react positively to the news today.
I'm very bullish on its prospects in the massive U.S. and Asian markets, so anything the company does to sharpen its focus there gets a big tick from me. Especially with fears over a slowdown in listings in the core Australian business.
At around 29x estimated FY 2017's earnings, REA Group is by no means cheap. But I believe its long-term growth prospects, high returns on equity, and its market-leading position more than warrant a premium over the market average.
As far as I'm concerned REA Group represents a great buy and hold investment and a vastly superior one to that of Domain-operator Fairfax Media Limited (ASX: FXJ).
