Car dealers AP Eagers & Automotive Holdings propose blockbuster merger

AP Eagers launches takeover bid for Automotive Holdings.

| 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

Australia's two largest car dealerships in AP Eagers Ltd (ASX: APE) and Automotive Holdings Group Ltd (ASX: AHG) want to create a $2.4 billion market leader in the space via a 'merger' of the businesses.

In effect AP Eagers is offering to takeover Automotive Holdings Group by offering 1 AP Eagers share for every 3.8 AHG shares owned to value AHG at $1.916 per share, or just a 7.6% premium to AHG's last exchange traded closing price of $1.79.

Based on the 120-day volume weighted average price of AHG scrip the premium is even less at 4.02%.

If the proposed takeover receives AHG shareholder and regulatory (ACCC) approval the combined group would have a fiscal 2018 pro forma profit before tax of $203 million on 56.3 cents in earnings per share.

It would also have 242 car dealerships in Australia and New Zealand, alongside 68 bus and truck dealerships in Australia.

AP Eagers also claims it could find $13.5 million in annual cost savings per year, while the group's larger balance sheet will give it more financial firepower to expand.

I cannot see any word from AHG's board's on a response to the offer, although it's possible it will demand a greater premium than that currently being offered.

AP Eagers already owns 28.8% of the scrip in AHG so it has a little leverage in any negotiations over a better offer.

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. You can find Tom on Twitter @tommyr345 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 Mergers & Acquisitions

two men shake hands on a deal.
Mergers & Acquisitions

Guess which ASX 300 stock is rocketing 23% on $1.1b takeover deal

This stock has accepted a takeover offer but it is a deep discount to its 52-week high.

Read more »

Two CEOs shaking hands on a deal.
Mergers & Acquisitions

Platinum shares drop despite L1 Capital merger agreement

These fund managers have agreed to merge their operations.

Read more »

Three happy office workers cheer as they read about good financial news on a laptop.
Mergers & Acquisitions

Guess which ASX 200 stock is jumping 9% on big news

Let's see why this stock is taking off this morning.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Technology Shares

Guess which ASX tech stock is racing higher on big news

This tech stock is making a key acquisition.

Read more »

Two brokers analysing stocks.
Energy Shares

Santos shares push higher on takeover update

What is the latest on this potential deal? Let's find out.

Read more »

A group of people gathered around a laptop computer with various expressions of interest, concern and surprise on their faces. All are wearing glasses.
Technology Shares

Guess which ASX 300 tech stock is making a 'cutting-edge' US$28m acquisition

What is this tech stock buying? Let's find out.

Read more »

Businessman cheering at desk with arms in the air
Technology Shares

Xero share price halted amid $3.9b game-changing US acquisition

The market darling is aiming to accelerate growth in the US with this major deal.

Read more »

Man with rocket wings which have flames coming out of them.
Mergers & Acquisitions

Which ASX All Ords stock is rocketing on takeover news?

This payments company has accepted a takeover offer.

Read more »