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REA Group (ASX:REA) share price on watch after acquisition update

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The REA Group Limited (ASX: REA) share price will be on watch this morning after a late announcement on Thursday.

What did REA Group announce?

After the market close on Thursday, the property listings company provided an update on its stake in India-based Elara Technologies.

At the end of October, REA Group announced an agreement to increase its holding in Elara. This was to be achieved through a combination of subscribing for new preference shares and the acquisition of the existing shareholdings of certain minority shareholders.

According to the release, REA Group’s shareholding in Elara has now increased from 13.5% to 54.3%. The company also now has the right to appoint 5 out of 9 Elara board seats and will consolidate Elara’s financial results effective 31 December 2020.

What is Elara Technologies?

Elara Technologies is the operator of India’s fastest growing digital real estate business based on audience size.

It has established brands Housing.com, PropTiger.com and Makaan.com operating in the world’s fastest growing trillion-dollar economy. Management notes that it has continued to increase its market share during the pandemic, delivering excellent audience and customer growth over the past two years.

What did this cost REA Group?

The release reveals that REA Group has paid a total of US$34.5 million in cash (A$48.9 million) and issued 318,323 new shares with a market value of A$46.8 million. This brings the total consideration to A$95.7 million.

In addition to this, REA Group revealed that its majority shareholder, News Corporation (ASX: NWS), has subscribed for US$34.5 million of preference shares in Elara. This has increased the media giant’s shareholding in Elara to 39% and means that REA Group and News Corp now own 93.3% of Elara between them.

What now?

REA Group has offered to acquire the remaining 6.7% minority interest in Elara and this process is expected to complete prior to the end of the calendar year.

If fully accepted, the consideration for the remaining minority interest will be paid by the issue of a maximum of 107,355 REA Group shares with an estimated market value of approximately A$15.8 million.

Management has advised that the final position will be updated with the release of its half year results in February.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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