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.
