The world of online property platforms is undergoing a significant shift as OnTheMarket, a prominent player in the UK real estate market, has agreed to a £99 million takeover by the US commercial real estate information group CoStar. The announcement sent shockwaves through the industry, causing OnTheMarket's shares to surge by more than 50% while rival Rightmove saw its shares drop by over 10%. This move is expected to reshape the landscape of the UK's residential property market, and it highlights the growing competition in the industry.
The Deal that Shook the Market
OnTheMarket's shares witnessed a remarkable 53.19% increase, jumping 37.50p to 108.00p in early trading following CoStar's offer of 110p per share. This offer represented a 56% premium to the closing price on the day before the announcement. Such a substantial increase in OnTheMarket's share price underlines the market's optimism regarding this strategic acquisition.
On the other hand, Rightmove, a longstanding leader in the UK property platform space, experienced a sharp drop of over 10% in its share price in response to this development. Analysts at Citi raised concerns about the potential impact on Rightmove, as CoStar brings substantial financial resources to the table.
CoStar's Competitive Edge
Citi analysts pointed out that CoStar has substantial financial firepower, with an estimated $450 million to $500 million in free cash flow per year. This financial strength positions CoStar to provide fierce competition to Rightmove, which has long been a dominant player in the residential property market.
CoStar, renowned in the world of commercial real estate, saw this acquisition as a strategic entry point into the UK's residential property market. OnTheMarket's management hopes that this collaboration will significantly accelerate its ongoing transformation efforts in the sector.
The Strength of the Deal
The takeover is supported by 29.5% of OnTheMarket's share capital, including its six largest shareholders. This significant backing underscores the confidence investors have in the potential of this acquisition to reshape the industry.
Jason Tebb, Chief Executive of OnTheMarket, expressed his optimism regarding the partnership with CoStar, saying, "CoStar will bring industry-leading global expertise and significant financial firepower to invest in OnTheMarket, allowing us to accelerate our transformation of the sector."
Chris Bell, Chairman of OnTheMarket, echoed this sentiment, stating, "The offer from CoStar recognizes the quality of OnTheMarket and the significant potential of the business, while offering shareholders an attractive opportunity to realize their investment at a substantial premium to the prevailing share price."
CoStar's Ambitious Entry
Andy Florance, Founder and Chief Executive of CoStar, highlighted the significance of this acquisition, saying, "We believe the acquisition of OnTheMarket represents an attractive and efficient entry point for CoStar into the estimated £8 trillion United Kingdom residential property market." This signals CoStar's ambitious plans to make a lasting impact on the UK property market.
A Changing Landscape
The property sector has been undergoing a period of transformation, as demonstrated by the sale of Purplebricks for just £1 to rival Strike earlier this year. These industry-shaking moves suggest that competition in the online property platform sector is intensifying, and market dynamics are evolving.
In conclusion, the takeover of OnTheMarket by CoStar is a significant development in the UK's real estate market. This strategic acquisition has the potential to challenge the established players and reshape the competitive landscape. Investors and industry experts will closely watch the evolution of this partnership and its impact on the property market.