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Everything you need to know about REA Group’s proposed acquisition

The REA share price fell after announcing the acquisition on Monday, March 29.

  • REA Group reveals agreement to acquire Mortgage Choice
  • The $244 million deal will be funded through debt

Broad strokes

REA Group (ticker: REA) on Monday announced that it had entered into an agreement to acquire Mortgage Choice.

For those unfamiliar, REA Group is Australia’s dominant property advertising portal. The company also has business interests across Asia and North America.

Mortgage Choice (ticker: MOC), by comparison is an Australia-based mortgage brokerage, boasting 500 brokers and 380 franchises across the country. While Mortgage Choice primarily focuses on home loans, it also offers business, car and other types of loans.

You can trade stocks like REA and Mortgage Choice – long or short – with IG. Create an account to get started now.

The Specifics

Under the agreement to acquire mortgage broker, REA Group said it will acquire 100% of Mortgage Choice’s outstanding shares at $1.95 per share.

  • At that offer price, the deal is valued at $244 million.

This represents a significant premium to Mortgage Choice's recent share price levels, with the offer representing a 66% premium to the stock's close last Friday.

Mortgage Choice’s board unanimously recommended that its shareholders vote in favour of the acquisition. Once/ if that is finalised, the acquisition will still need to meet a number of other requirements, including court and FIRB approval.

How

REA said it would fund the acquisition through debt, specifically noting that it would partially refinance its syndicated debt facilities. Syndicated debt facilities – which will expire in December – currently stand at $170 million.

Why

The company said that the acquisition formed part of its broader financial services strategy which would focus on leveraging the company’s deep digital insights and data.

Beyond that, REA's CEO, Owen Wilson said 'The acquisition of Mortgage Choice represents an exciting opportunity for REA to create a leading broking business. It builds on our success to date, accelerating our financial services strategy while leveraging our existing strengths and capabilities.'

Vicki Allen, Chairman at Mortgage Choice, said:

'This is a fantastic milestone for Mortgage Choice. Joining the REA network creates a significant opportunity to leverage its deep digital capabilities and expertise, combined with access to a larger and engaged consumer audience.'

Investors will also likely be pleased to know that the deal is ‘expected to be immediately EPS accretive’ for REA Group.

REA Group share price ↓

Investors bid REA lower off the back of this news, with the stock down 2.11% to 137.10 by 12:07PM.

Mortgage Choice share price ↑ ↑

While REA dipped, Mortgage Choice saw its share price skyrocket, with the stock up over 60% by 12:08PM. The stock last traded at $1.91, a shade below the acquisition price.


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