The REA Group has made a bid to acquire 100% of the share capital of the iProperty Group it does not already own. Under the proposed transaction, iProperty shareholders will receive cash consideration of $4.00 per share valuing the company at AUD 750 million.
As an alternative, iProperty shareholders will also be able to elect mixed consideration comprising of $1.20 in cash and 0.7 shares in a newly formed, unlisted public company, which will own an indirect interest in iProperty.
The acquisition of iProperty is the logical extension of REA’s market leading business in Australia and marks the next step in its strategy to pursue strategically sound expansion into attractive markets.
South East Asia is underpinned by highly attractive macroeconomic factors with strong growth prevalent across the region. The real estate market is expected to continue to grow driven by expanding populations and increasing GDP per capita, with the acceleration from offline to online advertising presenting an enormous opportunity for iProperty.
Tracey Fellows, CEO of REA, said “iProperty’s Board, management and staff have done a tremendous job of building iProperty from an emerging start-up, to occupying leadership positions in its key markets. This acquisition will bring iProperty into REA’s existing portfolio of digital real estate advertising businesses, and enable the business to take the next step in its evolution.
“iProperty is strongly positioned in its respective markets throughout South-East Asia and provides REA with exposure to new geographies where we can apply our experience and know-how from existing markets. This acquisition further demonstrates our commitment to international expansion, and is the next step in our growth strategy in the Asian region.”
REA will fund the acquisition primarily from new debt facilities totaling $480 million, with the remainder from existing cash reserves. REA’s leverage will be approximately 1.5x net debt / EBITDA on a pro forma FY15 basis but is expected to be lower by the time the transaction completes.
The acquisition is expected to complete during Q1 calendar year 2016 and iProperty will continue to be accounted as an associate until completion. As such, it will have little impact on EPS in FY16. On a pro-forma basis the acquisition will be mildly dilutive but iProperty is expected to continue to grow strongly and in line with iProperty’s current revenue growth guidance.