AHG looks under the hood of AP Eagers’ $2.4b takeover bid

Brisbane-based AP Eagers is keen to join forces with major competitor AHG but the takeover target has applied the brakes, telling shareholders to take no action.

AP Eagers chief executive Martin Ward at his car dealership in Fortitude Valley. Photo: Glenn Hunt

PERTH-BASED Automotive Holdings Group (AHG) has appointed KPMG to prepare an independent report into the pros and cons of a $2.42 billion merger proposed by AP Eagers.

AHG told its shareholders yesterday not to take any action on the merger plan launched last month by Brisbane-based AP Eagers.

The 106-year-old Eagers wants to merge with its major competitor to create the country’s biggest car retailing group amid growing signs of consolidation in the auto market.

The merger would create a company with 229 new car dealerships in Australia and 13 sites in New Zealand. AHG acting chairman John Groppoli said that the company’s directors strongly advised shareholders not to take any action on the proposal at this stage.

Under the merger proposal, AP Eagers, which already owns 28.84 per cent of AHG, will offer one AP Eagers share for every 3.8 AHG shares. AP Eagers closed yesterday up 6 cents to $8.66 while AHG shares gained 1 cent to $2.44.

“There is no need to rush your decision,” said Mr Groppoli. “AHG shares are trading at a price that is above the value implied by the offer. Your shares are currently worth more on the market than under the offer.”

AP Eagers says the proposed merger brought together two highly complementary businesses as they prepared for looming industry changes, including the emergence of popular brand electric vehicles.

In a bidder’s statement released on Tuesday, AP Eager chairman Tim Crommelin said combining the companies offered greater geographical diversification and a larger balance sheet. “Anticipated pre-tax cost synergies (are) estimated at $13.5 million per annum if AP Eagers acquires a relevant interest greater than 90 percent of AHG,” said Mr Crommelin.

AP Eagers said it believes that the likelihood of a competing proposal emerging for AHG is low. AHG has faced tough times recently, skidding to a first-half loss in February amid a tough retailing environment and regulatory changes to finance and insurance.

AP Eagers managing director Martin Ward said AHG shareholders could gain exposure to AP Eagers’ experienced management team, established strategy and proven track record of execution. “As our industry continues to respond to structural change, we believe that AP Eagers and AHG will be stronger together,” said Mr Ward.