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A P Eagers : Offer to Merge with Automotive Holdings Group Ltd

04/04/2019 | 08:47pm EST

5 April 2019

Market Announcements Office

ASX Limited

AP Eagers, AHG's largest shareholder, announces offer to merge with AHG

and create Australia's leading automotive retail group

Structured as an all-scrip offer of 1 APE Share for every 3.8 AHG Shares owned.

Provides the opportunity for AHG shareholders to participate in the expected benefits afforded by the combination of AP Eagers and AHG (Merged Group).

The Merged Group is expected to be better placed to pursue future growth opportunities through greater geographical portfolio diversification, enhanced brand portfolio diversification and a larger, more flexible balance sheet.

The Merged Group is expected to benefit from AP Eagers' proven management expertise that has delivered a consistent record of profit, dividend and earnings per share growth over the long-term.

The likelihood of a competing proposal emerging is low given AP Eagers' existing 28.84% interest in AHG.

Transaction Overview

A.P. Eagers Limited (ASX: APE) (AP Eagers) today announces its intention to make a conditional, all-

scrip offer to acquire all of the ordinary shares in Automotive Holdings Group Limited (ASX: AHG) (AHG) that it does not already own (AHG Shares) by way of an off-market takeover bid (the Offer).

Commenting on the proposed transaction, Martin Ward, CEO of AP Eagers said:

"As AHG's largest shareholder, and as a leader in the automotive retail industry with 100+ years of experience and a track record of profitable growth and shareholder returns since listing in 1957, we are convinced that a combination of AP Eagers and AHG represents a compelling opportunity for both sets of shareholders."

"Our proposal brings together two highly complementary businesses, with enhanced flexibility. Importantly, the Offer enables AHG shareholders to participate in the upside and benefits afforded by AP Eagers' proven management expertise and strategy which is expected to enable the combined group to grow and be better placed to respond to the rapidly evolving motor vehicle retailing market."

A.P. EAGERS LIMITED

ABN 87 009 680 013

Registered Office

5 Edmund Street, Newstead, QLD, 4006 P.O. Box 199, Fortitude Valley, QLD, 4006 T (07) 3608 7100 F (07) 3608 7111

Ecorporate@apeagers.com.au

Consideration

Under the Offer, AHG shareholders (other than foreign shareholders)i will receive 1 fully paid ordinary share in AP Eagers (APE Share) for every 3.8 AHG Shares owned (Offer Consideration).

The implied value per AHG Share represented by the Offer Consideration compared to the market value of AHG Shares (calculated on the same basis) as at 4 April 2019 is as follows:

Basis of assessing implied value

Market value of an AHG

Implied value per AHG Share

Implied

represented by the Offer

and market valueii

Shareiii

premium

Considerationiv

closing price on 4 April 2019

$1.780

$1.916

7.63%

based on the two day VWAP

$1.792

$1.916

6.91%

based on the 10 day VWAP

$1.759

$1.927

9.57%

based on the 30 day VWAP

$1.933

$1.953

1.06%

based on the 120 day VWAP

$1.757

$1.828

4.02%

Source: IRESS

Commercial Rationale

The Offer represents an opportunity for AHG shareholders to participate in the expected benefits afforded by the enhanced diversification and flexibility of the combined group, particularly in the context of AHG's deteriorating financial performance over time.

The commercial rationale for combining AP Eagers and AHG is underpinned by:

Greater geographical portfolio diversificationthrough exposure to motor vehicle retailing markets in all Australian States and Territories (other than the ACT), representing approximately 11.9% of the Australian new vehicle sales market,v as well as a market presence in New Zealand;

Enhanced brand portfolio diversificationthrough the Merged Group's anticipated 229 new car dealership locations in Australia,vi 13 new car dealership locations in New Zealand and 68 new truck and bus dealership locations in Australia. The Australian dealerships will represent 33 car brands and 12 truck and bus brands, including all of the top 26 leading car brands for the 12 months ended 31 December 2018.vii Collectively, these leading 26 car brands represented 95.5% of the total new vehicle sales market in Australia for that same period;viii

Anticipated pre-taxcost synergiesestimated at $13.5 million per annumix if AP Eagers acquires a relevant interest in greater than 90% of AHG Shares (and therefore moves, by way of compulsory acquisition, to acquire full ownership of AHG); and

A larger, more flexible balance sheetwith greater financial strength to pursue future growth opportunities, as evidenced by the following financial estimates (on the basis that AP Eagers acquires 100% of AHG):

unaudited pro forma FY18 profit before tax of $203.0 million (excluding synergies);x

a pro forma market capitalisation of approximately $1.84 billion;xi and

a pro forma FY18 enterprise value of approximately $2.42 billion.xii

In addition, the Offer is expected to provide AHG shareholders with an opportunity to benefit from exposure to AP Eagers':

Proven management expertisethat has delivered a consistent record of profit, dividend and earnings per share growth over the long term; and

2

Future growth strategyunderpinned by:

significant investment in an omni-channel retail approach to satisfy changing customer preferences;

leveraging its large and flexible portfolio of owned and leased properties to bring rationalisation and expansion opportunities;

capitalising on its distribution presence in the motor vehicle industry and extensive funding relationships to increase penetration of automotive and mobility finance;

redefining its workforce to better match changing customer shopping behaviour and deliver a more sustainable and productive cost base;

supporting innovation by its manufacturing partners to introduce ACE (autonomous connected and electric) vehicles and other emerging products and services; and

disciplined use of its larger, more flexible balance sheet to invest in future industry evolution and consolidation opportunities.

Conditions

The Offer is not subject to any minimum acceptance threshold, nor is it subject to any finance condition or due diligence. The Offer is subject to ACCC approval and a number of other conditions which are attached as Appendix 1 and detailed in the Bidder's Statement which is expected to be lodged with ASIC today.

Competing Proposal

AP Eagers currently owns 28.84% of AHG. As a consequence, AP Eagers believes that the likelihood of a competing proposal emerging for AHG Shares is low.

Bidder's Statement

AP Eagers intends to lodge a copy of its Bidder's Statement with ASIC and send a copy to AHG and the ASX today. The Bidder's Statement will contain detailed information relevant to the Offer, including how to accept. The Bidder's Statement is expected to be sent to AHG's shareholders on or about 23 April 2019 (although this could be subject to change).

Advisers

Morgans is acting as financial adviser and McCullough Robertson is acting as legal adviser to AP Eagers in relation to the Offer.

ENDS

For further information please contact:

Domestique Consulting

Lauren Thompson / Jon Snowball 0438 954 729 / 0477 946 068 Lauren@domestiqueconsulting.com.au / Jon@domestiqueconsulting.com.au

3

About A.P. Eagers Limited

AP Eagers is a 106 year old pure automotive retail group founded in 1913. With its main operations in Queensland, Adelaide, Darwin, Melbourne, Sydney, the Newcastle and Hunter Valley region of New South Wales and Tasmania, AP Eagers' focus is on its core business of owning and operating motor vehicle dealerships which provide full service facilities covering new motor vehicle sales, used motor vehicle sales, servicing, spare parts and the facilitation of allied consumer finance.

The majority of AP Eagers' operations are provided through strategically clustered dealerships, many of which are situated on properties owned by AP Eagers, with the balance being leased. As at 31 December 2018, the land and buildings associated with these properties had a book value of $332 million.xiii

The AP Eagers Group represents a diversified portfolio of automotive brands, including 21 of the top 22 selling car brands in Australiaxiv and 8 of the top 10 selling truck and bus brands in Australiaxv (for the 12 months ended 31 December 2018). In total, AP Eagers' represents 26 car brands and 10 truck and bus brands across 108 new car dealership locations and 33 new truck and bus dealership locations.xvi

AP Eagers has been listed on the ASX for 62 years and has a track record of paying a dividend in respect of every financial year as a listed company. The full year dividend to be paid in respect of FY18 of 36.5 cents per APE Share will be the 17th record full year dividend paid in respect of the previous 18 financial years.

4

Appendix 1 - Conditions of the Offer

The Offer and any contracts resulting from acceptance of the Offer are subject to fulfilment of each of the following conditions:

1(All Regulatory Approvals) Before the end of the Offer Period, the Regulatory Approvals are:

(a)granted, given, made or obtained unconditionally, or on the basis of conditions that impose only non-material requirements incidental to the approval or consent;

(b)remain in full force and effect in all respects; and

(c)do not become subject to any notice, indication or intention to revoke, suspend, restrict, modify or renew them.

2(No regulatory action) Between the Announcement Date and the end of the Offer Period (each inclusive):

(a)there is not in effect any preliminary or final decision, order or direction issued by any Regulatory Authority;

(b)no action, proceeding or investigation is announced, commenced or threatened by any Regulatory Authority; and

(c)no application is made to any Regulatory Authority (other than by AP Eagers or any Associate of AP Eagers),

in consequence of or in connection with the Offer (other than any action or decision by or application to ASIC or the Australian Takeovers Panel in exercise of the powers or discretions conferred by the Corporations Act) which is likely to or purports or threatens to restrain, prohibit, impede or otherwise adversely affect the making of the Offer, the acquisition of the AHG Shares by AP Eagers, the rights of AP Eagers in respect of AHG and the AHG Shares or the continued operation of the businesses of AHG or its Subsidiaries or which seeks to require the divestiture by AP Eagers of any AHG Shares, or the divestiture of any assets by any member of the AP Eagers Group or by any member of the AHG Group.

3(No Prescribed Occurrences) Between the period from the date on which the Bidder's Statement is given to AHG and the end of the Offer Period (each inclusive), none of the following events (each a Prescribed Occurrence) occur:

(a)AHG converts all or any of its shares into a larger or smaller number of shares;

(b)AHG or a Subsidiary of AHG resolves to reduce its share capital in any way;

(c)AHG or a Subsidiary of AHG enters into a buy-back agreement or resolves to approve the terms of a buy-back agreement under section 257C(1) or 257D(1) Corporations Act;

(d)AHG or a Subsidiary of AHG issues shares (other than AHG Shares issued as a result of the exercise of AHG Performance Rights which are on issue at the Register Date), or grants an option over its shares, or agrees to make such an issue of shares or grant such an option;

(e)AHG or a Subsidiary of AHG issues, or agrees to issue, convertible notes;

(f)AHG or a Subsidiary of AHG disposes, or agrees to dispose of, the whole or a substantial part of, its business or property;

(g)AHG or a Subsidiary of AHG grants, or agrees to grant, a security interest in the whole, or a substantial part of, its business or property;

(h)AHG or a Subsidiary of AHG resolves to be wound up;

(i)a liquidator or provisional liquidator of AHG or a Subsidiary of AHG is appointed;

5

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

A.P. Eagers Limited published this content on 05 April 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 05 April 2019 00:46:06 UTC


ę Publicnow 2019
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