The value of digital real estate platform REA Group continued to plunge on Monday in the wake of a takeover bid for its main rival Australian rival, Domain Holdings (ASX: DHG), from a large American company.
Domain last week disclosed it had received a non-binding indicative offer of A$4.20 (US$2.69) per share from Nasdaq-listed CoStar Group (NASDAQ: CSGP) which values Australia’s second largest property platform at $2.7 billion.
At 11 am AEDT (12 pm GMT) REA (ASX: REA) shares were trading at $230.10, down $6.08 (2.57%) on the day, capitalising the company at $30.39 billion.
This brought the fall in its share price to 13.5%, equating to a loss of market value of $4.6 billion, since the offer was announced on 21 February, the day after US$31.5 billion CoStar purchased a 16.9% stake in its target as a launching pad.
This was despite REA, 61% owned by Rupert Murdoch’s News Corporation, posting higher half year profits earlier in February, although the announcement came with news of the resignation of long time CEO Owen Wilson.
Domain shares meanwhile have soared over the same period by about 37% to $4.33, giving the company a market value of $2.74 billion and increasing the value of the 60% stake owned by parent, Nine Entertainment (ASX: NEC).
Stockbroker E&P said although REA could sustain the competitive pressure of a new investor in Domain such as one with deep pocks like CoStar, it expected the Domain price to come under pressure from a bid.
E&P analysts noted that when CoStar announced its entry to the United Kingdom market in October 2023, the value of leading online real estate platform Rightmove (LON: RMV) was re-rated.
“However, this ultimately proved to be an attractive entry point and similarly, investors in the Australian market may well see weakness in REA as an opportunity,” Analysts Entcho Raykovski and Hamish Fraser wrote in a research note.
