Recently the REA Group announced that it would be exiting the New Zealand market and that it had entered into an advertising deal with the remaining player, realestate.co.nz. However, in exiting the market, did the REA Group capture as much value as they could?
This entry does not to debate whether the REA Group should or should not have exited the New Zealand market. The question that arises is having made the decision to exit New Zealand, did they maximise shareholder value in the exit approach they took?
In looking at the REA Goup's exit of New Zealand, it is important to look at the allrealestate.co.nz asset. As of August this year, the REA Groupl claimed that allrealestate.co.nz was the #2 player in the New Zealand market (source: REA Group Full Year Result). The site had:
When exiting a market, any business is faced with a number of options. They can sell the business to an existing player, they can sell to an interested (but not existing) player or they can close the business.
The first step would have been to find a buyer for the assets and the most logical place to look would have been the incumbent players - realestate.co.nz and trademe.co.nz.
As a buyer appears not to have been found, they have decided to close the business. In doing so, they further entrenched realestate.co.nz to as the leading property portal in the NZ market.
Although there is an advertising deal in place, will this deal it truly reflect the value that the REA Group is giving to realestate.co.nz by exiting the market?
The author is shareholder in the REA Group and the ex-Managing Director.