Ray White Sells REA Group Shareholding
July 1, 2009 by Simon Baker
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In a surprise move late last night, the Ray White Group sold its complete shareholding in the REA Group (realestate.com.au). The long time second largest shareholder sold 13.5 million shares at $5.75 per share, yielding $77.6 million. This represents a change of ownership of 10.8% of the REA Group shareholding base. It is believed that the shares have been acquired by a number institutional investors and, surprisingly, not by News Corp.
This sale follows hot on the heels of a transaction in October last year in which New Limited purchased 3m shares in the REA Group from Ray White for $4.50 a share.
The Ray White Group first became a substantial shareholder in the REA Group (formerly realestate.com.au) in August 2002 when it acquired 15.8% of the shareholding from Macquarie Bank at around $0.15 per share.
Sam White is expected to continue as a Board Member of the REA Group – a position he has held since September 2002. Sam will also personally retain a smaller shareholding the REA Group.
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What is the speculation regarding the reason for this?
A big announcement on the last day of the Australian Financial Year.
Also, a surprise that News Ltd did not acquire the shares, therein providing them total control (albeit officially) of the REA Group.
Whether Ray White sold their shares to take advantage of the substantial gains in their investment, or to simply cash up in the face of an uncertain future in the online space in Australia, we can only speculate.
However, it would be easy to come to the conclusion that with recent announcements of the REA Group closing operations around the world resulting in reduced revenue potential (less growth opportunity), and with constant speculation of Google entering the online property space in coming months, that these would have weighed on the mind of any serious investor.
The very interesting question to ponder is: Why didn’t News take up the chance to get total control of the REA Group?
Based on first half (Financial Year) results, the REA Group will post a profit. A very attractive proposition one would think for News, whose other companies are experiencing extremely challenging times.
So what stopped News from gaining control of a profitable company? Moreso, an Online company, which represents (potentially) better long term grown opportunities than the Print stable which dominates the News empire?
Whatever the motivation by News to not acquire the shares will remain speculative. However their action of not purchasing the shares to take control of the company, speaks volumes.
A cashed up Ray White is well poised to survive the economic downturn, and they may indeed be looking at potential acquisitions. Rumours have it that Suncorp Metway has been unofficially liaising with suitors (Companies wanting to purchase) for L.J. Hooker for some time. Perhaps a cashed up Ray White is the answer to Suncorp’s problems with L.J. Hooker.
It goes without saying, that investing in the REA Group was a very wise decision by Sam White, and kudos goes to him.
A “cloak and dagger” trade as it currently presents. No announcement by Way Right either adds to the mix of speculation especially the eleventh hour June 30 trade?
Smells a rat
Robert
Sometimes the most obvious answer is the right answer … here is the formal announcement on the ASX
Sam White said “I remain committed to the REA Group as both a shareholder and a member of the board. The sale of the shares owned by the Ray White Group will allow the Ray White Group to invest back into our core family business and to fund other emerging opportunities.”
Simon
So the big question is do they make a tilt at Hookers?
And could they make it work if they did?.
Next with implications for the portal players is with over 2000 branches could they become a meaningful internet player?
Simon
So you call that an answer? Where the shares offered to News Ltd – absolutely not. Maybe they will put these funds into Google Adwords for when the Google real estate launches in Australia (that being the one you told me on the phone would never happen).
Yes – obvious although I seriously doubt whether it is the right answer? We shall watch and see
Robert
Google realestate is a joke,from what i hear losing staff as the americans dont know how to play outside of the usa
Are we still talking about google in the real estate industry? Haven’t we been going on about this for years? I still fail to see how its going to make substantial dent in the portals if it actually happens at all. My guess is it will end up being another app with portals still being the main players.
What’s with all the ‘cloak and dagger/conspiracy’ stuff?
RW cashed out with a massive profit to use the funds in their core business….nuff said?
June 30 trade? hardly earth shattering….
Robert
Yes i do call that an answer.
Your crystal ball needs a bit of a polish. As you can see from an article today on Property Portal Watch, News was offered the shares and while News Limited wanted to buy them, they were trumped by their masters in New York.
As for Google entering the market … zzzzzzzzzzzzzzzzzzz
There has been so much talk about this over the last few years that its getting a little repetitive … anyway, last time i looked they had a little search engine that was doing ok.
Simon Baker
I’m with Simon on the Google thing Robert in that Richard Kimber the previous Australian Google CEO and Karim the current Google CEO both have expressed no desire to jump into the Australian R/E portal business.
Given the relationship that both REA and Fairfax have with Google as customers it’s just not going to happen and your comments are just scare mongering and have been for years. Google just have bigger fish to fry!
The only two guys heralding the coming of Google are you and Greg Ellis but for completely different reasons and differing perceived outcomes.
The non-arrival of google (they’ve been arriving since 2005) surely makes people realise that a global company who makes its money out of search has ZERO interest in tackling a niche classified vertical in lowly ‘ol Australia…
Simon,
I hope you have woken up with todays news of Google entering that market. !!!
Actually, there are quite a few people with foot in mouth so at least you are not alone.
Google entering the market has been no secret to the industry for the past 12 months. All the Non Disclosure agreements do not stop people talking. What was the unknown was when. Obviously with Google Wave Developer release now over they could move on to the other important stuff…
Now we can see just how much of an impact this will make to the industry.
Craig A….
Imagine a company declaring they are not going to do one thing, and then they turn around and do exactly that… Completely unheard of!! How rude
Whilst this is hardly a vertical implementation, it certainly impacts on the subscription models of REA and Domain. How much… time will tell. But I would not go ruling them out of this fight twice in a row or you might have egg on your face and foot in mouth at the same time
Craig – I did try to tell you as I left plenty of clues on this release
so a global company that makes money out of search gives a sh*t about Australia? we are just a testing ground.
As a consumer, when Agents stop using realestate.com.au and domain.com.au and only use Google…that’s the game changing and not until then will people change en mass.
I still use Google as somewhere to tell me where to find stuff…i don’t stop and stay on Google.
Will be interesting to see how this evolves.
One thing is for sure….turn off the printing presses!
Craig A,
Great to have you back. I have been missing your talking points.
So just what has Greg Ellis been saying about Google? I look at the CEO blog on realestate.com.au and Greg seems to be “very very quiet”… maybe it is “wabbit season”?
Perhaps your company needs to accept working and living in the era of google? time to be a bit more Agile?
I am loving the spin coming out of REA at present – particularly how a piece of normal Display Advertising is packaged as the result of an exclusive strategic partnership. (RPData) Getting a little desperate if you need to resort to making press releases about advertising deals which are then touted as some kind of technical innovation.
It seems Simon Baker, you and Greg Ellis all called this one wrong.
The Google AU property map solution is not a portal, it is not a portal killer, but it certainly should make every portal in Australia and for that matter the world, stop and think.
What is more impressive in a listings presentation?.. “I can put your listings on Google, the most trafficked and searched site in AU”, or “I can put it on the property portals.”
How will domain and realestate.com.au push their traffic stats now, and tie them up as an excuse to increase subscription rates?
What strategies will realestate.com.au deploy to counter the Franchise Groups who will be promoting their own sites and Google over your website?
What will happen when/if google open up their property map as an API, so anyone can start a portal? or better still, customise their own property search engine?
There are significant challenges for Google – but they have every opportunity ahead of them.
But it does make you wonder… if Google is going to make it difficult for the Australian portals to increase subscription fees… does that mean that REA, being a News Corp Subsiduary, will follow Rupert Murdoch’s insight/directive into online revenue, and start charging property seekers to access the content?
At the end of the day, agents, and online advertising is the winner. This development will inspire new innovation, new marketing approaches, and different pricing.
Curious George..
Firstly there is ZERO chance and then 24 hours later when that zero chance actually comes up and you are proven wrong… now we are just the testing ground and it will never work.
You are a hard man to please… will you be right this time? My suggestion for the day… Don’t go betting on it with your understanding of how statistical theory works
I dont get it. So google are now pushing a form of the map technology a lot of portals have been using for long time…ground breaking.
Here is the other thing I dont get. A few agents seem to think that the nice guys at google are somehow less of an all devouring beast than News Ltd or Fairfax…. good luck with that one lads.
Hi Glenn
I’m flattered by your attention to my comments..even i don’t take myself all that seriously
If I’m going to be held accountable every time I’m right or wrong..well I’m stuffed.
Anyway, the point i was trying to make is that i find it hard to believe that Google with a market cap. US$130 billion, revenues of approx US$25 billion in 2009 and with >90% of that coming from search would even bother chasing the online real estate market in Australia…its so small change…Australia is a rounding error for Google and real estate a rounding error of a rounding error…
Hence that Google will probably use Australia as a testing ground for enhanced mapping features…which is great for us but i doubt their status as ’saviours from domain and REA’ for Agents like yourself or others. In fact line up REA, Fairfax and Google..all in the same category. There to make a profit and as much as possible…
BTW i never said it wouldn’t work…but agents will have to stop using REA and domain and i think this is a fair way off.
Reading through the comments a few questions come to mind
1) Will Google actively push it to the front of their search and integrate it with the main search or will it go the same way as Froogle? Remember Froogle?
2) Will agents actively upload and manage their listings or will it become a collection of out of date listings and therefore no real use to the consumers or agents?
3) Will Google enhance the tools offered and include email alerts and email contact forms? At the end of the day these tools drive traffic to the realestate.com.au and leads to agents?
4) Will agents care that private sellers will flock to Google to advertise their listings? If they do care, will they support Google, and if they dont care, will the really care if realestate.com.au takes private listings?
We have entered into a new phase the does raise more questions than it really answers.
Simon Baker
Simon,
My best guesses..
1/ I will quote you back to yourself “We expect to see the listings search results incorporated into the general search results at some point in time.” If they follow their other markets that housing has been introduced this will just be a matter of time, which you seemed to agree with only yesterday. You now doubt that will happen?
2/ Its just a data feed. Not that much different to the feeds being sent to every other portal every day by all the portal pushers. .
3/ No I think it is the last thing on their mind. more on all that below.. .. They will use their own products to give it traffic and supplement with traffic from mashup portals that will no doubt be created once the Google Base data is opened up like the other markets.
4/ No, Yes and Yes… Google and Domain never promoted to be private sale free. Many agents wont be happy if realestate.com.au go back on their word. For my mind thats what the real problem is, not the private listing themselves.
***********
Just to put a different spin on everything you seem to think Google has to play by the same rules. I think we all agree that it is not a portal… so asking if it will provide the same services as a portal seems a bit out of place.
If you base your company description on how a company makes its money then Google is not a search company.. very little of its money comes from search. It makes money from its search operations, which is an entirely different situation. Google is an advertising company. That is where it makes the majority of its money although admittedly it has been diversifying a little bit lately.
Google makes money serving up data that other people are looking for and showing an ad or two at the same time. Real Estate is no different to web pages, images, news or blog posts that google dips its toes into. Google wants to be the middle ground, the site you find other sites on.. It wants to be the path to the solution, not the destination. It will point you in the right direction but it wont try and provide you with all the wizzbang features as it leaves that to the destination sites.
A short and sweet experience and the visitor is handed off to the third party website to continue their experience. Oh yeah.. if you clicked on a small ad on the way then they make a few cents.
Do that billions of times a day across nearly every country in the world and across many different types of searches and industries and you make a few bucks. Its the efficiency of how they handle these searches and providing the user with the site to visit to get the information they requested that has made them so popular.
What I take most comfort in though is your “new phase” comment. So the game has not changed… but has just started a new phase.. Playing semantics now are we ??
[...] early July 2009 the Ray White Group sold its complete shareholding in the REA Group. The Ray White Group had been the second largest shareholder and sold 13.5 million shares at $5.75 [...]