News Corp and REA Group Limited make strategic U.S. acquisition: Should you buy?

News Corp (ASX:NWS) and REA Group Limited (ASX:REA) have spent US$950 million in acquiring an 80% and 20% interest respectively in an online U.S. real estate business.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

What: News and information company News Corp (ASX: NWS) agreed overnight to buy Move Inc. (NASDAQ: MOVE), a leading online real estate business in the United States for US$950 million. REA Group Limited (ASX: REA), which is 61.6% owned by News Corp plans to hold a 20% stake in Move with the balance held by News Corp.

This is the largest transaction by Rupert Murdoch’s publishing arm since the split from the film and entertainment business Twenty-First Century Fox Inc (ASX: FOX) in June 2013.

In late afternoon trade News Corp and REA Group were down 1.2% and 0.8% respectively, while the S&P/ASX 200 Index (INDEXASX: XJO) had risen 0.7%.

So What: Through realtor.com and its mobile applications, Move displays more than 98% of all for-sale properties listed in the U.S. and has the most up-to-date and accurate for-sale listings of any online real estate company in America.

Robert Thompson, chief executive of News Corp said: “This acquisition will accelerate News Corp’s digital and global expansion and contribute to the transformation of our company, making online real estate a powerful pillar of our portfolio.”

Meanwhile, REA Group chief executive Tracey Fellows stated that: “We believe that our digital real estate know-how, combined with News Corp’s content, distribution and marketing strengths, will be a winning combination for Move and for our shareholders.”

Move’s online business brings consumers and realtors together to facilitate the sale and rental of real estate. It has an exclusive, strategic relationship with the National Association of Realtors (NAR), the largest trade organisation in the United States, with more than 1 million members, and NAR has given its consent to the acquisition.

Move is focused on providing a high Return on Investment (ROI) for agents and benefits from its invaluable marketing support and high quality listings for vendors and potential purchasers.

Now What: In my opinion, the acquisition appears to be a win for News Corp, REA Group and Move, and my preference would be to buy REA Group for full exposure to the structural swing in advertising away from newspapers to the internet.

However, my only reservation is that no mention of competition was made in the press release. An overnight Bloomberg report makes it clear that Zillow Inc (NASDAQ:Z) is set to acquire rival Trulia Inc (NYSE:TRLA). This transaction would create the largest company involved in online real estate advertising. However, Move can distinguish itself from these firms by focusing on its relationship with realtors.

Motley Fool contributor Mark Woodruff does not own shares in any of the companies mentioned in this article.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »