AP Eagers (ASX: APE) has announced its intention to acquire all the remaining shares in Automotive Holdings Group (ASX: AHG) that it does not already own to merge the two automotive retail companies.
The proposed deal would mean the merged company would be one of the leading automotive retail groups in Australia representing 33 car brands across 242 new car dealerships.
AP Eagers currently holds 28.84 per cent of AHG shares, putting it at a significant advantage to any potential competing proposals.
CEO of AP Eagers Martin Ward (pictured) says the proposal is a compelling offer for shareholders with AP Eagers offering one APE share for every 3.8 AHG shares owned.
In total, the deal would create a merged entity worth around $1.8 billion.
"As AHG's largest shareholder, and as a leader in the automotive retail industry with 100+ years of experience and a track record of profitable growth and shareholder returns since listing in 1957, we are convinced that a combination of AP Eagers and AHG represents a compelling opportunity for both sets of shareholders," says Ward.
"Our proposal brings together two highly complementary businesses, with enhanced flexibility. Importantly, the offer enables AHG shareholders to participate in the upside and benefits afforded by AP Eagers' proven management expertise and strategy which is expected to enable the combined group to grow and be better placed to respond to the rapidly evolving motor vehicle retailing market."
Based on the closing price of AHG shares on 4 April ($1.78 per share) today's offer from AP Eagers is a premium of 7.63 per cent.
AP Eagers are rationalising the proposal by claiming that a merged company will have a larger market presence across Australia and New Zealand, a more diverse brand portfolio, the ability to save on taxes, and a larger, more flexible balance sheet.
Today's proposal comes during a strong period for the 106-year-old automotive retail group.
The company is riding high on improved revenue thanks to strong operating results for its car and truck retailing businesses; both achieved record results in December 2018.
APH has been on a downward slide for the last 11 months. In May 2018 the company was trading at $3.40 per share, and it is yet to return to those levels.
Shares in AP Eagers are up 4.40 per cent to $7.60 per share at 10.10am AEDT, and shares in AGH are up 13.48 per cent to $2.02 per share.
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