THE prospect of a mega-group in automotive retailing with around 12 per cent share of Australia’s 1.1 million annual new-vehicle market moved a step closer this week with AP Eagers announcing that more than half of the shareholders in Automotive Holdings Group (AHG) are backing the merger.

Analysts have already begun talking about the merged company running under the name ‘Eagers Automotive Holdings’.

AP Eagers has told the ASX that it has received acceptance instructions for 22.50 per cent of AHG shares. AP Eagers already holds a relevant interest in AHG of 28.85 per cent.

This means those committed to support the merger, as a percentage of AHG shares on issue, has now increased to 51.35 per cent.

Acceptance instructions for 22.50 per cent of AHG shares on issue have been deposited with the Acceptance Facility since AP Eagers’ offer opened on April 23, 2019.

AP Eagers said in the ASX statement: “The number of shareholders depositing acceptance instructions into the Acceptance Facility at this early stage sends a strong signal to the AHG board about their support for a merger of the two businesses.”

AP Eagers chief executive Martin Ward said: “To move beyond 50.1 per cent so early in the offer period represents a massive vote of confidence in our merger proposal.

“In our view, this strongly signals a belief among those shareholders who have deposited acceptance instructions with the Acceptance Facility that both companies will be stronger together under our proven management expertise and track record of profitable growth.

“We encourage all of our fellow AHG shareholders to accept the offer so the full benefits of the merger, particularly the synergies, can be realised.”

Meanwhile, the Australian Competition and Consumer Commission (ACCC) has started to assess an application lodged by AP Eagers for authorisation to acquire AHG.

The ACCC said AP Eagers’ application is the first merger authorisation to be considered by the consumer watchdog since reforms in 2017 restored the ACCC’s ability to consider applications for merger authorisation.

“Under the new process, the application comes to the ACCC first rather than the Australian Competition Tribunal,” ACCC chairman Rod Sims said in a statement.

Under the new merger authorisation process, the ACCC may grant authorisation for a proposed merger if it is satisfied the merger is not likely to substantially lessen competition, or where the public benefits outweigh the detriment to the public (including where the proposed merger does lessen competition).

The ACCC statement said that AP Eagers and AHG are the two largest automotive retailers in Australia.

AP Eagers and AHG both supply new and used cars, trucks and buses, as well as associated products and services such as motor vehicle repair and servicing, authorised car parts, insurance and finance.

“They operate car dealerships around Australia, including a number of locations where they both compete, such as Brisbane, Melbourne, Sydney and the Newcastle/Hunter Valley region of New South Wales,” the ACCC said.

“The ACCC’s assessment will focus on the likely effects of the proposed acquisition on competition, and under the authorisation test the ACCC can also consider whether any public benefits likely to arise from the proposed acquisition would outweigh the public detriments,” Mr Sims said.

The authorisation process is public and transparent. AP Eagers’ application is available on the ACCC’s public register and submissions received during the consultation process will also be publicly available, subject to confidentiality restrictions.

By John Mellor