The AP Eagers Ltd (ASX: APE) share price has pushed higher this morning after it provided an update on its proposed merger with Automotive Holdings Group Ltd (ASX: AHG).
At the time of writing the automotive retailer's shares are up over 2% to $9.41.
What was announced?
This morning AP Eagers announced that it has offered to divest its Kloster Motor Group business to assist in securing regulatory authorisation for its proposed merger with Automotive Holdings.
This follows an announcement out of the ACCC last month which revealed that the competition watchdog has preliminary concerns with AP Eagers' plans due to the potential impact on competition in new car retailing in the Newcastle/Hunter Valley region of New South Wales.
What is Klosters?
Klosters is an 85-year-old automotive retailer based in the Newcastle and Hunter Valley region and has been owned by AP Eagers since 2007. The business employs 410 people and generates approximately $420 million in annual revenue.
The release advises that it has a diverse portfolio of nine major vehicle brands (BMW, Ford, Honda, Hyundai, MINI, Mitsubishi, Nissan, Suzuki and Volkswagen), operating dealerships in Newcastle, Cardiff, and Maitland.
Whilst AP Eagers believes its merger with Automotive Holdings will not substantially lessen competition in any market, it made the move to address the regulator's preliminary concerns so it can proceed with the merger in a timely manner.
Management advised that it has entered into a Heads of Agreement with the Tony White Group for the sale of Klosters at an estimated sale price of $54 million for net assets and goodwill.
The sale is expected to complete in November 2019, subject to satisfactory due diligence, completion of formal transaction documentation, manufacturer approval, and of course ACCC authorisation of the Automotive Holdings merger.
AP Eagers CEO Martin Ward said: "Klosters has an established reputation locally for the highest standards of customer service built on integrity, credibility and quality. We believe TWG represents an excellent fit with Klosters and our staff who are the foundation of this iconic business in the Newcastle and Hunter Valley region."
Judging by the share price rise today, some investors appear to believe that this could get the deal over the line.
