REA Group Ltd (ASX: REA) shares are falling again on Monday morning.
At the time of writing, the property listings company's shares are down 1.5% to $196.30.
Why are REA shares dropping?
Investors have been selling the realestate.com.au operator's shares this morning after it released an update on its proposed takeover of Rightmove (LSE: RMV).
As a reminder, earlier this month REA Group made an offer of 305 pence in cash and 0.0381 new REA shares. This implied a total offer value of 705 pence per share, which valued Rightmove at GBP5.6 billion or $11 billion.
However, while the market felt that REA Group was overpaying, this sentiment wasn't shared by Rightmove. The offer was swiftly rejected by its board. It concluded that the offer "was wholly opportunistic and fundamentally undervalued Rightmove and its future prospects."
What's the latest?
This morning, REA confirmed that on 16 September it made a revised non-binding indicative proposal.
The company tabled an offer of 749 pence for each Rightmove share, which represents a 6.25% increase on its original offer.
However, once again, the Rightmove board rejected REA Group's proposal. The company explains:
The Improved Proposal was rejected by the Board of Directors of Rightmove on 18 September, continuing to characterise it as fundamentally undervaluing Rightmove.
Third time lucky?
This morning, REA revealed that it has come back to the table with a third offer. On 22 September, the company increased its offer to 341 pence in cash and 0.0422 new REA shares.
Based on its prevailing share price, this represents an offer of 770 pence per share, which implies a total consideration of approximately GBP6.1 billion or A$11.9 billion.
This is a 9.2% increase on the initial proposal and represents a 39% premium to Rightmove's undisturbed share price of 556 pence on 30 August.
If accepted, Rightmove shareholders would hold approximately 20% of the combined group's issued share capital following completion of the proposed transaction.
REA's CEO, Owen Wilson, commented:
We believe that the combination of our world-leading expertise and technology with the attractive Rightmove business will create an enhanced experience for agents, buyers and sellers of property. We live in a world of intensifying competition and this proposed transaction would bring together two highly complementary digital property businesses for investment and growth.
We have today increased our proposal to an implied value of 770 pence – it provides a combination of immediate value certainty in cash and at the same time gives Rightmove shareholders an increasing opportunity in core digital property and adjacencies where we have much expertise. We are genuinely disappointed at the lack of engagement by Rightmove's Board and we strongly encourage the Rightmove Board to engage.
