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.

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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 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.

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