Online advertising firm REA Group believes it has identified the perfect vehicle to export its Australian success story to the US with the purchase of a minority stake in US property company Move.
REA, 61.1 per cent-owned by News Corp, publisher of The Australian, has agreed to take a 20 per cent stake in Move with 80 per cent of Move held by News Corp as part of a $US950 million ($1.08 billion) deal announced this week.
Just as News Corp’s Australian newspapers played a crucial role in brand-building and marketing the operator of realestate.com.au, REA chief executive Tracey Fellows said Move would be able to draw on the company’s US assets, which include The Wall Street Journal and News America Marketing.
“We think that’s a pretty powerful combination,” she said. “We’ve been looking at the US for a period of time and, given the strategic intent at News Corp which wants to continue its growth in digital, it’s a logical coming-together. It was a natural meeting of minds, you could say.”
Speaking to investors, News Corp chief executive Robert Thomson noted The Wall Street Journal Digital Network generated 500 million page impressions every month.
“We intend to make each one of those pages become a marketing platform for Move,” he said.
News Corp was spurred to take over Move after its experience with REA, which it has developed from a fledging start-up that began life in a Melbourne garage to a lucrative classified advertising business, capitalised at $5.5bn.
Key to replicating REA’s success is Move’s close links to real estate agents, which REA intends to nurture in partnership with News Corp. Move is the industry website representing the two major industry bodies in the US real estate market, aggregating 98 per cent of all for-sale listings.
“We see the relationship with the (National Association of Realtors) as an opportunity for us collectively to accelerate the growth potential they have in the US market,” Ms Fellows said.
News also plans to leverage REA’s technology expertise with digital platforms to boost Move’s strategy.
“What we’ve seen in Australia is that we have some grounded knowledge in how we create great consumer experiences, build audiences and engage the audience deeply,” Ms Fellows said.
REA chairman Hamish McLennan said Move would “leverage the learnings and expertise from REA in combination with News Corp”.
In a shot across the bow of Move’s rivals, Ms Fellows said Move could exploit anxiety created by an ongoing merger between the top two US real estate players.
She said “there’s going to be a lot of complexity and potential for distraction”. Asked if Move could repeat REA’s blistering performance in the US, Ms Fellows said: “Move can be the US version of REA absolutely.”
The deal is News Corp’s biggest transaction since the historic split of Rupert Murdoch’s media empire last year, which created a stand-alone print, publishing and digital company.
News has agreed to pay $US21 a share for Move. Move’s shares surged 37.08 per cent, or $US5.67, to $US20.96 on the Nasdaq at close on Tuesday.
Shares in News Corp on
the ASX closed down 1.11 per cent to $18.67 on the announcement. REA shares fell 0.85 per cent to $42.91.
Citi analyst Justin Diddams said the acquisition represented a “positive move to deploy excess cash into an industry with robust growth opportunity”.
With News Corp able to add considerable marketing firepower and real estate expertise to Move, Mr Diddams said the risk and return was “skewed to the upside” for News.