The market may have crashed lower today, but that hasn't stopped the AMA Group Ltd (ASX: AMA) share price from storming higher.
In morning trade the smash repair company's shares are up 13% to $1.38.
Why is the AMA Group share price storming higher?
Investors have been buying the company's shares this morning after they returned from a trading halt following the completion of its institutional placement and the institutional component of its entitlement offer.
According to the release, AMA raised approximately $178.9 million from institutional investors at a price of $1.15 per share. This was a 5.3% discount to its last close price.
A further $36.7 million is now expected to be raised via the retail component of the entitlement offer, bringing the total to $215.7 million.
Why is AMA raising funds?
These funds are being raised to acquire the Capital S.M.A.R.T Group business from Suncorp (ASX: SUN) for an enterprise value of $420 million.
Capital S.M.A.R.T is the banking and insurance giant's market leading smash repair business in Australia and New Zealand.
AMA Group's CEO, Andy Hopkins, was pleased with the strong support from institutional shareholders and believes the acquisition is a big positive for the company.
He said: "We are very grateful for the strong support our institutional shareholders have shown for the acquisition and AMA's growth strategy. The acquisition of Capital S.M.A.R.T represents an exciting opportunity to combine AMA's industry leading platform with Capital S.M.A.R.T's best in class capabilities in low to medium severity panel repairs. The management team is now focused on successfully completing and integrating the acquisition."
Combined with the purchase of the ACM Parts business from Suncorp for $20 million, management expects the transaction to be double digit EPS accretive in the first full year of ownership.
In light of this, I can't say I'm surprised by the positive response to this acquisition and feel AMA Group is worth taking a closer look at.
