The REA Group Ltd (ASX: REA) share price is racing higher on Tuesday morning.
At the time of writing, the property listings company's shares are up 4% to $209.79.
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What's going on with the REA Group share price today?
Investors have been buying the realestate.com.au operator's shares this morning after it released an update on its proposed takeover of UK-based Rightmove (LSE: RMV).
According to the release, on Monday, Rightmove rejected REA Group's fourth non-binding indicative proposal. And with the deadline for talks now over, REA Group confirmed that it does not intend to make a binding offer for Rightmove.
While this might seem like bad news, the market was never keen on the deal. So, with talks now over, investors have been buying the company's shares again.
What happened?
REA notes that its approach was driven by a clear strategic rationale and the opportunity to create a global and diversified digital property company, with strong margins and significant cash generation, underpinned by number one positions in Australia and the UK.
It also believes the proposed combination would have provided Rightmove shareholders the opportunity to meaningfully participate in a fast growing, diversified, global leader whilst receiving value certainty in an operating environment challenged by increased market competition.
And with Rightmove's share price lacking any sustained upward momentum for two years despite being supported by its ongoing share buyback programme and revised strategy announced at last year's Capital Markets Day, it feels that its fourth proposal of 775 British pence per share would have been an excellent outcome for them.
However, Rightmove's directors were unwilling to engage meaningfully with REA. The most engagement it got was an introductory high-level chairman-to-chairman meeting which took place on 28 September.
'Disappointed'
REA Group's CEO, Owen Wilson, was disappointed with the way things turned out. He said:
Against a backdrop of intensifying global competition, we approached Rightmove's Board because we strongly believed in the opportunity to create a globally diversified leader in the digital property sector that would benefit both REA and Rightmove shareholders. We were disappointed with the limited engagement from Rightmove that impeded our ability to make a firm offer within the timetable available. They had nothing to lose by engaging with us.
We are always financially disciplined when we look at M&A and reinvestment in our business and will continue to focus on the many other opportunities ahead of us. Our recent investment in Athena Home Loans is a great example of this. We have a clear strategy to expand in our core business and adjacent markets, and India represents an exceptional opportunity for growth. We look forward to pursuing these opportunities and generating further value for REA shareholders.
The REA Group share price is 35% over the past 12 months.
