Eclipx Group Ltd (ASX:ECX) share price rockets 20% higher on merger news

The Eclipx Group Ltd (ASX:ECX) share price has rocketed 20% higher after announcing plans to merge with McMillan Shakespeare Limited (ASX:MMS)…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The biggest mover on the ASX 200 on Thursday has been the Eclipx Group Ltd (ASX: ECX) share price.

At the time of writing the fleet management provider's shares are up 19.5% to $2.75.

Why are Eclipx Group's shares racing higher?

This afternoon McMillan Shakespeare Limited (ASX: MMS) and Eclipx Group announced that the two companies intend to merge via a scheme implementation agreement.

Both management teams believe that doing so will establish a leading salary packaging and fleet management company.

According to the release, the proposed transaction, which is subject to numerous conditions, will be implemented by McMillan Shakespeare acquiring all shares in Eclipx under an Eclipx Scheme of Arrangement.

Eclipx shareholders will receive 0.1414 McMillan Shakespeare shares plus 46 cents cash for each Eclipx share held. This implies a total value of $2.851 per Eclipx share.

Why are the two companies looking at merging?

As well as establishing a leading salary packaging and fleet management company, the two parties believe the industrial logic of combining these complementary businesses is compelling.

It expects the merger to deliver EBITDA run-rate synergies of $50 million per annum following integration, before implementation and transaction costs. The merger is expected to be earnings per share accretive pre synergies

In addition to this, it expects the combined entity to deliver an improved offering for all customers and material benefits for employees.

What now?

Judging by their respective share price performances today, it appears that the market believes that Eclipx Group shareholders got the better deal.

While its shares are one of the best performers on the ASX 200, McMillan Shakespeare's shares are amongst the worst performers. The McMillan Shakespeare share price is down 4% to $16.22 at the time of writing.

Overall, if the merger is approved then I think it would create a real force in the industry. This could make the combined entity an attractive option for investors and a great alternative to rivals Smartgroup Corporation Ltd (ASX: SIQ) and SG Fleet Group Ltd (ASX: SGF).

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Gainers

Rising share price chart.
Share Gainers

Why Core Lithium, Goodman, GQG, and Macquarie shares are pushing higher today

These shares are starting the week in a positive fashion. But why?

Read more »

Happy woman working on a laptop.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a pleasant end to the trading week for investors this Friday.

Read more »

A happy investor sits at his desk in front of his laptop and does the mexican wave with his arms to celebrate the returns from his ASX dividend shares
Share Gainers

Why Chrysos, GQG Partners, Macquarie, and Webjet shares are storming higher today

These shares are ending the week on a positive note. But why?

Read more »

A young man sits at his desk working on his laptop with a big smile on his face.
Share Gainers

The top 3 ASX 200 trades since the Liberation Day dip

These companies are up at least 35% in just over a month.

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Share Gainers

Boss Energy shares have rocketed 90% in a month. Here's why

The massive rally in Boss Energy shares will be painful to the host of short sellers betting against the uranium…

Read more »

Fancy font saying top ten surrounded by gold leaf set against a dark background of glittering stars.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors sent the market higher once again today.

Read more »

Rising gold share price represented by a green arrow on piles of gold block.
Gold

3 reasons to buy this surging ASX All Ords gold stock today

The ASX All Ords gold stock has doubled investors’ money in 12 months, and this leading expert forecasts more outperformance…

Read more »

Two colleagues at work looking at a tablet and smiling at a rising share price.
Share Gainers

Why Generation Development, Orica, Pro Medicus, and Zip shares are storming higher today

These shares are having a strong session on Thursday. But why?

Read more »