AP Eagers puts forth $54m deal amid ACCC concerns

05/07/2019 - 10:41

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AP Eagers has offered to sell dealerships in Newcastle and the Hunter Valley region, as it aims to assuage the Australian Competition and Consumer Commission’s issues with its proposed acquisition of rival Automotive Holdings Group.

Martin Ward says the Tony White Group represents an excellent fit with Klosters.

AP Eagers has offered to sell dealerships in Newcastle and the Hunter Valley region, as it aims to assuage the Australian Competition and Consumer Commission’s issues with its proposed acquisition of rival Automotive Holdings Group.

AP Eagers told the ASX it has a non-binding agreement to sell its Kloster Motor Group to Queensland-based Tony White Group by November for $54 million, subject to the deal satisfying the regulator’s concerns.

Last month, the ACCC had preliminary concerns about the $2.3 billion takeover, which would leave one company in control of 46 per cent of new car dealerships in the Newcastle/Hunter Valley region of NSW.

“In metropolitan Newcastle alone, the combined company would operate 77 per cent of dealership sites selling the 10 most popular brands,” the ACCC said.

The ACCC is scheduled to announce whether it will approve the merger by July 26.

Today, AP Eagers said it did not believe the acquisition would substantially lessen competition, but was offering to sell Klosters so it could proceed with the AHG deal in a timely way.

Newcastle-based Klosters is an 85-year-old automotive retailer that AP Eagers has owned since 2007.

AP said Klosters sells nine major vehicle brands at locations in Newcastle, Cardiff and Maitland, employs 410 people, and generates $420 million in revenue.

Tony White Group has 40 dealerships in locations across Australia's east coast and Tasmania.

AP Eagers chief executive Martin Ward said the Tony White Group represented an excellent fit with Klosters, who were the foundation of its business in the Newcastle and Hunter Valley region.

“Klosters has an established reputation locally for the highest standards,” he said.

In May, AHG urged its shareholders to accept a revised offer from AP.

AP Eagers offered one share for every 3.6 AHG shares, instead of one for 3.8 AHG shares it proposed in April.

Prior to the takeover offer, AP was already AHG’s largest shareholder with a nearly 29 per cent stake.

Shares in AP Eagers were up 1.96 per cent to $9.37 at noon, while shares in AHG were down 0.2 per cent to $2.80 at the same time.

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