Aussie car dealer AP Eagers Ltd made an all-stock offer on Friday to buy smaller rival Automotive Holdings Group Ltd that valued the latter at A$635.3 million ($451.83 million), sending Automotive’s shares nearly 17 percent higher.
The bid comes at a time when consumer spending has been a major concern and could prompt some consolidation in the retail automotive sector.
Automotive Holdings in February had reported a loss for the first half due to tough retail conditions. New vehicle sales in Australia fell by about 7 percent in March from a year earlier, according to the Federal Chamber of Automotive Industries.
AP Eagers, which is Automotive’s biggest shareholder, offered 1 share of the company for every 3.8 Automotive Holdings shares owned, or $1.92 per share, based on its Thursday close.
The offer represents a premium of about 8 percent to Automotive’s Thursday close.
Automotive’s shares jumped as much as 16.9 percent, their best in 10 years, to a one-month high and were up 15.2 percent at A$2.05 as of 0331 GMT.
AP Eagers Chief Executive Martin Ward said the deal would put the combined group in a better place “to respond to the rapidly evolving motor vehicle retailing market.”
The company expects the acquisition to deliver annual cost savings of about A$13.5 million, he added.
AP Eagers said the chances of a possible rival bid were low given its existing 28.84 percent stake in Automotive Holdings.
Automotive confirmed the bid, and advised shareholders to take no action.
Shares in AP Eagers gained as much as 7.4 percent, in a weaker broader market.