It's been another positive start to the trading day thus far for the S&P/ASX 200 Index (ASX: XJO). After recording a 0.2% rise yesterday, the ASX 200 is up again today. The index is enjoying a rise of 1.11%, which puts the index back above 7,040 points. But let's talk about the Eagers Automotive Ltd (ASX: APE) share price.
Eagers shares are doing even better than the broader market today. At present, the ASX automotive dealership company has gained a rosy 1.19%. That leaves Eagers at $14.40 a share.
This healthy rise comes after the company announced some big news this morning just before market open.
This morning, Eagers released an ASX statement that confirmed the company is to undergo a "large-scale expansion".
Eagers has reportedly entered into a non-binding agreement to acquire "a portfolio of dealerships and key strategic properties located across Melbourne and the Mornington region of Victoria from a group of companies associated with Nick Politis".
This portfolio consists of a dealership group as well as "three associated properties". All up, it will set Eagers back $245 million. Of that $245 million, Eagers is forking out $111 million for goodwill, $100 million for property assets (53,500 square meters), and $34 million for "net assets".
Eagers will be funding the acquisition through the issuance of $25 million worth of new Eagers shares to the sellers. The remaining balance is to "be paid in cash".
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Adding $1 billion of annual turnover
The dealership group will add 13 properties to Eagers' portfolio. The company itself will own three, with the remaining properties to be "leased on commercial terms from the sellers and third parties".
These dealers house multiple leading vehicle brands, including BMW, Jaguar, Land Rover, Mercedes-Benz, MG, Mini, Mitsubishi, Nissan, Renault, Skoda, Volkswagen and Volvo.
Eagers estimates that these acquisitions will add "approximately $1 billion in annual turnover" for the company". That's in addition to adding "substantial scale" to the company's Victorian operations.
The acquisition isn't quite a done deal yet though. Eagers notes that there are still a few hurdles to overcome, including due diligences, finance approval and the consent of the landlords.
Eagers also stated that "The transaction is also subject to shareholder approval due to the relationship between Mr Politis and the various selling entities". Politis is a member of the Eagers board already, as well as having a controlling stake in the assets to be sold.
Here's some of what Eagers Automotive CEO Kith Thornton said in the Eagers statement about the acquisition:
To be able to acquire such a high-quality, large-scale business, representing circa $1.0 billion in annual sales or more than 10% of the total revenue of Eagers Automotive, is a compelling and highly valuable opportunity for the company. It will increase our presence in Melbourne, a region we have previously
identified as having significant runway for growth, taking our annual turnover in this region alone from
$1.5 billion to $2.5 billion.
Eagers share price snapshot
Judging by Eagers' share price movements today, it seems investors are excited over the acquisition news that has been announced. Today's gains leave Eagers shares up a pleasing 33.3% year to date. That's as well as up 26.6% over the past 12 months, as you can see below:
At the latest Eagers share price, this ASX 200 stock has a market capitalisation of $3.7 billion, with a dividend yield of 5.07%.
