An investment activist has urged OnTheMarket stakeholders to reject the group’s takeover by US-based CoStar, arguing the deal is ‘not in the UK’s national interest’.
Brett Stone, who is not himself an investor in the group, said the £99million deal was ‘opportunistic’ and ‘significantly undervalues’ the property portal.
In an open letter to stakeholders, Stone said institutional and estate agent shareholders should both vote against CoStar’s offer.
OnTheMarket shares surged at the time of the deal’s announcement last month, driving Rightmove shares lower on investor confidence new ownership would help the group take on its main UK rival.
Open letters: Brett Stone said institutional and estate agent shareholders should both vote against CoStar’s offer for OnTheMarket
‘No deal is better than a bad deal, ending estate agent’s ownership in the agents’ portal is not the right answer to solve OnTheMarket’s problems’, Stone said.
Stone wrote three letters to all shareholders, all estate agents in the UK and OnTheMarket employees.
According to Stone, Washington DC-based CoStar’s proposed acquisition of OnTheMarket ‘is not in the United Kingdom’s national interest’.
He added: ‘If the CoStar transaction is approved by shareholders it is likely to result in significantly higher total portal costs for UK estate agents, more than 10,000 of which are small businesses.
‘Ending estate agent’s ownership in the agents’ portal is not the right answer to solve OnTheMarket’s problems,’ he claimed.
A spokesperson for OnTheMarket, said: ”OnTheMarket refutes both that the proposed deal undervalues OnTheMarket and that it is it is likely to result in significantly higher total portal costs for UK estate agents .
‘As previously stated, partnering with CoStar will significantly accelerate our strategy with the clear target of delivering what agents want – the ability to have a real choice on which portal to list with.
‘Furthermore, CoStar has committed to fair and sustainable pricing and intends to continue charging agents a small proportion of Rightmove’s current charges.
‘CoStar will bring industry-leading global expertise and significant financial firepower to invest in OnTheMarket, allowing us to accelerate our transformation of the sector.
‘We have strong shared values in our commitment to agents who we believe will benefit from unparalleled value and greater opportunities to enhance their businesses.’
According to his LinkedIn profile, Stone is the managing partner of Edengen, a private investment partnership focusing ‘on the long-term success of investees’ customers, employees, communities, products, and industries’.
Stone said: ‘CoStar’s proposed shock-and-awe marketing spend strategy is designed to win consumer traffic, increase CoStar’s pricing power and then increase estate agents’ expenses. Rightmove and Zoopla are likely to increase marketing spend too, increasing the categories cost base, total agents expenses (more than 10,000 of which are small businesses), and increasing risk in the nationally important property commerce category.’
Stone wants to see OnTheMarket’s chairman Christopher Bell resign, ‘allowing shareholders to appoint an honest competent director who understands digital markets, can protect your interests, and make sure OnTheMarket’s chief executive officer delivers for you, shareholders, consumers and other agents.’
He added: ‘Since July 2020, the last results before Jason Tebb (CEO) joined OnTheMarket, 1,831 agents have left OnTheMarket. Despite this poor performance, OnTheMarket paid Jason more than £700,000 in cash and he has taken options over 2,985,412 shares.’
CoStar, a heavyweight in the world of commercial property, said at the time of the annoucement it believed the deal represented an ‘attractive strategic entry point’ into the UK residential property market. OnTheMarket hopes the deal will ‘accelerate’ its transformation.
The takeover proposal is backed by 29.5 per cent of the group’s share capital, including its six biggest shareholders.
In October, Tebbs, said: ‘From a position of strength, partnering with CoStar will significantly accelerate our strategy with the clear target of becoming the market leader, whilst staying committed to fair and sustainable pricing.’
OnTheMarket shares were down 0.8 per cent or 0.87p to 108.13p on Thursday morning, having risen over 50 per cent in the last year.