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A merger proposal involving two of Australia's leading car dealerships is revving up as boards seek to steer shareholders in opposing directions.
Earlier this month AP Eagers (ASX: APE) made a scrip-for-scrip takeover bid for Automotive Holdings Group (ASX: AHG) which valued the smaller company at $635 million, but hype around the proposal has pushed its market capitalisation up to more than $800 million.
Today the Brisbane-based suitor sent out a Bidder's Statement to shareholders in AHG, in which it already has a 28.84 per cent share.
In order to secure ownership of the whole company, AP Eagers is willing to give up one of its shares for every 3.8 AHG shares held in the remainder of the Perth-based group.
In the statement AP Eagers put forward its persuasive case to AHG shareholders highlighting an opportunity to participate in the benefits of a larger merged group and exposure to a proven track record of profitable growth and a future growth strategy.
AP Eagers estimates the combined entity would be worth $1.84 billion with unaudited pro forma FY18 profit before tax of $203 million, and has noted the strength of a merged group could provide an opportunity to leverage its size and expand into complementary ventures like ride sharing and subscription services.
The suitor also expects the likelihood of a competing proposal is low.
But AHG has hit back, claiming any action on the bid from its shareholders could be to their disadvantage as shares are now trading at a price that is above the value of the offer.
AHG has commissioned KPMG to prepare an independent assessment of the offer and has described the proposal is still "highly conditional".
"Your Board and management, together with its advisers, are reviewing the Offer and expect to dispatch a Target's Statement to AHG shareholders on or before Wednesday, 8 May 2019," the company said.
"AHG recommends that you properly consider the Target's Statement from AHG (including KPMG's Independent Expert's Report) and seek independent advice about the Offer and its consequences for you.
"The Offer is highly conditional and AHG expects that there will still be a significant period of time for you to determine a course of action following receipt of the Target's Statement."
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