Realestate.com.au owner REA Group Limited (ASX:REA) announced the proposed acquisition of iProperty Group Ltd (ASX:IPP) for a cash consideration of $4 per share.
iProperty group operates a number of property portals in Asia including Malaysia, Hong Kong, Thailand and Indonesia. REA Group, which owns some of the leading digital property portals in Australia, aims to expand into South East Asia and has therefoe decided to increase its ownership in IPP. The company states that South East Asia is “underpinned by highly attractive macroeconomic factors with strong growth prevalent across the region”.
iProperty Group directors have voted in favour of the proposed transaction, as always subject to an independent review and in absence of a superior proposal.
REA Group calls the acquisition a “logical extension of REA’s market leading business in Australia.” REA’s Chief Executive Officer Tracey Fellows said: “iProperty’s Board, management and staff have done a tremendous job of building iProperty from an emerging start-up to occupying leadership in positions in its key markets.”
iProperty shareholders can elect to receive a cash consideration of $4 per share which is a ~14% premium to Friday’s closing price of $3.51. Alternatively they can choose to receive a mixed consideration comprising of $1.20 in cash and equity in a newly unlisted public company that owns interest in iProprty Group.
The acquisition is funded via debt and existing cash reserves and will propel REA’s debt to equity ratio of 1.5x net debt to EBITDA.
REA Group has appointed Citigroup Global markets as financial advisor and Gilbert + Tobin as legal advisors. REA entered into a trading halt this morning as well as both companies will continue trading at 11am (AEDT). REA has gained ~6% while IPP is up ~31% year-to-date.
Author: Simon Herrmann
Nov 02, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.