Trevor Abrahmsohn is an agent at Glentree International
Well, well, well, the Australian online property conglomerate, REA (part-owned by Rupert Murdoch’s News International) is making some serious overtures to try and acquire the scandalously profitable UK property portal, Rightmove plc, with a muted cash and share offer.
Clearly, they want to get their thieving hands onto Rightmove’s 70%+ profit margin and its pivotal role in the UK residential property market.
It will cost them dear, since already the Rightmove share price has moved northwards by over 25% and the game has only just begun.
And look who we have got as a second possible acquisitor, the US portal giant CoStar, which effectively ‘stole’ OntheMarket.com from the naïve estate agent owners, for a measly £100million, is also interested in acquiring Rightmove plc but I am sure that the Competition Commission would see off any bid from them, as the combined group would certainly control a significant majority of the marketplace, and as a result, the estate agent consumers would be hugely disadvantaged.
By way of history, about 14 years ago, I started OntheMarket.com (OTM) in my boardroom and it was always intended as a sanctuary utility site to help protect its owners, a large number of UK residential agents, against the duopoly giants at the time, Rightmove and Zoopla.
I was also on the board of Prime Location when the industry was in its infancy, circa 2001 and this was absorbed into Lord Rothermere’s Daily Mail and General Trust (DMGT) for £48million at the time, which then morphed into Zoopla.
I was the lone, conscientious objector to the sale of OTM to CoStar, since I thought that £100million, to buy a significant slice of the portal market was cheap and with its cash resources, it would build a ‘Giant Killer’ in the marketplace and before too long would, effectively, become No 2, challenging the unassailable Rightmove.
In preference, I would have advised the shareholders of OTM to do a large Rights Issue enabling CoStar to get a majority stake in the company and then by keeping the public company quotation, both them and the agent shareholders would have benefitted from the association, whilst the latter still has some control on the tariffs charged by the combined group moving forwards.
Instead, the agents ‘sold their souls to the devil’ and will pay a hefty price for this folly, in the future.
In the alternative to acquiring OTM, for CoStar to assemble 3,000 or so estate agents into a new portal venture, would have cost them far more than £ 100million, and would take many years to gain traction.
Oddly enough, I personally wrote to the CEO at REA to enquire whether they would want to be the ‘White Knight’ for OTM, before the deal was sealed with CoStar but clearly, at the time, there was no interest in this.
Presumably, the attractive earnings that Rightmove would provide for REA, would be rated more highly in the Australian capital markets than in the UK and by all accounts, it has plenty of cash to fund the acquisition apart from the consideration in their shares.
With all these behemoths circling the industry, the biggest fear amongst estate agents is that Rightmove (or other) will start to sell property themselves as well as listing them and quicker than you can say, Tie Me Kangaroo Down Sport, the entity will be the largest estate agents in the UK and in an unassailable position in the marketplace.
Rightmove plc is probably the most profitable and sustainable quoted trading company in the market today and perversely, was originally founded by a group of estate agents many years ago.
As the saying goes, “From little acorns, mighty oaks grow.”
