The last month has seen massive changes at the leadership level in the Australian property portal space.
The first question is why are all these leaders resigning.
No reasons have been given beyond the usual "to pursue other options" or "for personal reasons". Clearly there has to be more to it than that.
There is speculation in the Australian market that one of the reasons behind Greg Ellis leaving was that he was being under paid and has been offered a significantly higher package overseas. A review of the Annual Report shows a base salary of $700k per annum - far less than the CEO at Seek.com who is on $1.7m base package. However Greg Ellis has done well out of his share package over the years so perhaps there is more to it.
Additionally it is also speculated that working with News Corporation, the majority shareholder, may have been becoming more and more challenging especially given the large value of the REA Group on the News Corporation books.
Another view is that the competitive dynamics in the Australian market place are changing and that getting out now, while the going is good, could also be behind the decision for the REA Group CFO and CEO to move on within less than a month of each other.
Antony Catalano has a reputation for being very aggressive (recently acquired Property Data Solutions to merge with APM) and he is clearly not a fan of the REA Group. Back in September 2012, a B&T article reported that Antony Catalano accused the REA Group of offering large cash offers to Melbourne real estate agents. Clearly he is not afraid to take on the REA Group and one can expect to see significantly more competition in the Australian market over the next 12 months.
A week ago the REA Group was trading at 16x revenues (yes revenues) and 30x EBITDA. These are clearly high multiples and the market is clearly valuing the business as if it was operating in a monopoly position. However, with more intense competition (from Domain), these multiples are likely to come down. Following the announcement of the resignation of Greg Ellis the REA Group shares have dropped nearly 10% or wiping around $500m off the market cap.
Next week we will look at what these changes mean for the Australian market place.
The REA Group has announced an investor briefing tomorrow.
Simon Baker is the former CEO and MD of the REA Group (2001 - 2008) and former Chairman of the iProperty Group.
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