A subcommittee of the board of online property ads site, realestate.com.au (ASX:REA), has recommended that shareholders reject what it describes as a hostile take-over offer from News Limited, which has flagged that it wants to buy the company outright.

News, a 43.6% shareholder of REA last week announced its intention to make a takeover offer at $2.00 per share for all of the shares in REA that it does not already own.

A board sub-committee comprising Sam White and John McGrath, have informed shareholders and the public that:

• the offer is uninvited and hostile;

• the subcommittee directors both recommend against acceptance of the offer;

• each of the subcommittee directors will not accept the offer in relation to the shares in which they respectively have a relevant interest (in aggregate approximately 28.4% of the shares that News does not already own);

• the REA share price as at the date of this letter is $2.27, 14% above the offer price (REA shares closed last Friday at $2.40);

• the offer was made prior to release to the market of:

• an update of financial information for the 2005 year (indicating expected net
profit of $5.4m, 119% above 2004); and

• 2006 budget indicating an anticipated 2006 net profit of $14m (159% above
2005); and

• the 2006 budgets were approved by REA's full Board in June 2005, well before the
offer was announced.

The subcommittee directors have appointed investigating accountants to express a view on the reasonableness of the 2006 budget. This will be included in the target's statement.

The target's statement will also include:

• the detailed reasons the subcommittee directors both recommend the offer should be rejectede by shareholders; and

• an independent expert's report on whether the offer is fair and reasonable.

The sub-committee pointed out that if shareholders do wish to sell REA shares prior to an independent evaluation of the offer from News, they can currently sell them on market for more than the offer price.

The subcommittee directors say they strongly believe that under the management team now leading the company, REA is well positioned to continue its strong growth.

After its recent failure to take over global VoIP provider Skype, News, which has made no secret of its ambitions to capture a large share of the online space, looks like it may well hit another snag locally with REA. However, with more than 43% of the company already in its grasp, it is hard to see News not prevailing in the long run.