The Ampol Ltd (ASX: ALD) share price is fuelled up and zooming higher on Monday.
In afternoon trade, the fuel retailer's shares are up over 3% to $30.08.
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Why is the Ampol share price charging higher?
Investors have been bidding the Ampol share price higher today after it announced that it has entered into a binding scheme implementation agreement to acquire Z Energy Ltd (ASX: ZEL).
According to the release, the two parties have agreed on a price of NZ$3.78 cash per share. This represents an enterprise value of NZ$2.8 billion.
In addition, Z Energy shareholders will be entitled to a NZ$0.05 per share interim dividend for FY 2022 that won't impact the cash offer price.
But it doesn't stop there. Depending on how long the transaction takes to complete, the offer price could increase. The release explains that if the transaction has not been implemented by 31 March 2022, the final cash consideration will be progressively increased to reflect Z Energy's FY 2023 performance. This allows for an increase of up to NZ$0.10 per share.
Is this a good deal?
Judging by the Ampol share price performance today, it appears as though the market believes this is a good deal.
And it's not hard to see why. Z Energy is the market leader in New Zealand with a 40% share of all fuel volumes. As a result, Ampol believes that acquiring Z Energy will create a "Trans-Tasman fuel champion."
Management is also forecasting significant transition and synergy opportunities totalling NZ$60 million to NZ$80 million. These are expected to be achieved via fuel procurement and overhead cost reductions.
This is expected to lead to the transaction being double digit earnings per share accretive and +20% free cash flow accretive in 2023.
The Ampol share price is now up 22% over the last 12 months.
