In morning trade the Automotive Holdings Group Ltd (ASX: AHG) share price has pushed higher after the release of an update on its proposed merger with AP Eagers Ltd (ASX: APE).
What was announced?
This morning AP Eagers announced that it has agreed to improve its all-scrip offer to acquire Automotive Holdings by increasing the consideration offered from 1 APE share for every 3.8 AHG shares to 1 APE share for every 3.6 AHG shares.
This offer has gone down well with the directors of Automotive Holdings who have agreed to unanimously recommend that shareholders accept the improved offer, in the absence of a superior proposal. Should the merger go ahead, the merged entity will have a market capitalisation of $2.3 billion based on their last close prices.
The chairman of Automotive Holdings, Richard England, explained that the board believe the offer is in the best interests of shareholders.
He said: "Having regard to the increased value for AHG shareholders and the reduced conditionality, the Board of AHG believes that the Improved Offer is in the best interests of AHG Shareholders, in the absence of a superior proposal. The Improved Offer provides AHG shareholders with the opportunity to continue their exposure to any future growth in AHG's earnings and value and, if sufficient AHG shareholders accept the Improved Offer, the financial and strategic benefits that are expected to accrue to the merged group."
The chairman of AP Eagers, Tim Crommelin, appeared to be very pleased with this development and excited by the potential merger.
He said: "We are delighted the AHG Board shares our view on the logic and benefits of bringing the two companies together to create Australia's leading automotive group. We look forward to working with the AHG team to satisfy the remaining conditions of the Offer, including obtaining ACCC and third party approvals, as quickly as possible in order to deliver the best outcome for shareholders in the merged group."
What now?
As Mr Crommelin mentioned above, this merger will need to obtain approval from the ACCC. I believe there's a good chance of the deal being approved by the competition watchdog, which could mean the creation of a $2.3 billion automotive group will soon be a reality.
Whilst I would suggest investors stick with Carsales.Com Ltd (ASX: CAR) for now, if the merger goes ahead it could be worth considering.
