REA Group’s ‘end-to-end’ play for the Australian housing market

News Corp majority owned ASX-listed real estate offshoot, REA Group, is continuing to diversify, announcing a 34% stake in Simpology, a leading provider of mortgage application and e-lodgement solutions for the brokering and lending industries.

The deal comes just days ahead of the second court hearing for the group’s 100% takeover of Mortgage Choice Limited, scheduled for tomorrow.

Mortgage Choice shareholders voted last week in favour of the proposed acquisition of Mortgage Choice by REA Group by way of a scheme of arrangement.

The investments further accelerates the group’s financial services strategy. The stake in Simpology will enable REA to provide consumers with more choice when navigating home loan options. It will also deliver productivity improvements to REA’s broker network through higher quality loan submissions.

The $15 million needed for the transaction is to be funded from the group’s existing cash reserves. REA will take two seats on Simpology’s Board following the successful transaction.

REA Group chief executive officer, Owen Wilson, commented: “REA’s investment in Simpology reinforces our commitment to delivering the best end-to-end mortgage application solution for consumers, our brokers and their clients.”

The takeover of Mortgage Choice will see REA Group pay $1.95 in cash per scheme share. The maximum amount expected to be required to fund the takeover is approximately $249 million based on Mortgage Choice’s fully diluted issued share capital as at the date of the Scheme Booklet distribution.

Mortgage Choice is an Australian mortgage broking business with more than 500 brokers, 380 franchises across the country, and over 30 lending partners. It has a loan book of $54 billion dollars and settlements of $11 billion dollars in the 12 months to December 2020. For the six months to December 2020 it reported  net revenue of $22.2 million and net profit after tax of $4.1 million.

REA intends to fund the transaction via an increase in REA’s syndicated debt facilities. REA’s existing $170 million syndicated debt facility, which is currently due to expire in December 2021, is expected to be refinanced as part of this process.

Provided the second court hearing goes through without issue, the last day of trading on the Australian Securities Exchange for Mortgage Choice would be Friday, 18 June. Implementation of the takeover is scheduled for 1 July.

In its latest financial reports, REA Group revenue (excluding acquisitions) rose by 8% to $225.6 million, for Q3 of FY21, while Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) including share of profit/losses from associates grew by 13% year-on-year to hit $123.3 million. REA Group’s assets include leading Australian real estate listing website

News Corp controls 61% of REA Group, which owns property website, Australia’s leading property site, with more six million visitors a month, according to the website.


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