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- After starting the day in a trading halt, GUD Holdings (GUD) has announced it will acquire AMA Group’s ACAD business for $70 million
- ACAD makes and distributes automotive products across Australia and New Zealand and is considered a strategic addition to GUD’s business
- GUD will gain more product and customer diversity, along with higher exposure to fast-growing pick-up truck and SUV vehicle segments
- To fund the buy, the ASX 200-lister is looking to raise $70 million — $55 through a placement and up to $15 million through a share purchase plan
- The placement will issue around 5.1 million shares at $10.75 — representing an 11.2 per cent discount to the five-day volume-weighted average price (VWAP)
- GUD last traded for $11.83 on Wednesday, November 18
After starting the day in a trading halt, GUD Holdings (GUD) is set to acquire AMA Group’s ACAD business for $70 million.
The ASX 200-lister has also announced its intention to raise up to $70 million to fund the acquisition.
Acquisition
ACAD manufactures and distributes automotive products across Australia and New Zealand and is considered to be highly complementary to GUD’s automotive business.
The acquisition deal will see GUD acquire all of the ACAD businesses, which include East Coast Bullbars, CSM Service Bodies, Automotive Electrical & 4WD Accessories (AE4A), Uneek 4×4/Barden Fabrications and Fully Equipped.
What will not be included in the acquisition is AMA Group’s car component remanufacturing business, FluidDrive. It also won’t sell its ACM Auto Parts business.
The consumer discretionary stock believes the buy will provide its company with a list of benefits.
“The acquisition of these businesses is highly complementary to GUD’s automotive business and provides strategic diversification across products and customer channels, along with increased exposure to fast growing pick-up truck and SUV vehicle segments,” Managing Director and CEO Graeme Whickman said.
The acquisition will diversify GUD’s customer base as well as its product offering. In particular, the company is pleased to enter the fast-growing 4WD accessory space.
Additionally, the acquisition provides upside potential and a positive financial impact.
ACAD is expected to achieve $83.4 million of revenue and $9.2 million of earnings before interest, taxes, and amortisation (EBITA) in FY21F.
At its AGM, GUD announced group sales grew by 14 per cent over the prior year, automotive sales grew approximately 16 per cent, and Davey sales in the first quarter grew by 10 per cent over the prior year.
Further, GUD expects there’ll be near-to-medium term opportunities arising from domestic tourism, used car volumes and government stimulus as a result of COVID-19.
Equity raise
The equity raising consists of a fully underwritten institutional placement to raise $55 million and a non-underwritten share purchase plan (SPP) to raise up to $15 million.
The placement will issue around 5.1 million new fully paid shares to certain eligible institutional investors to raise approximately $55 million at an underwritten floor price of $10.75 per share.
The floor price represents a 9.1 per cent discount to the last traded price of GUD shares of $11.83 on November 18 and an 11.2 per cent discount to the five-day
volume-weighted average price (VWAP) of $12.10.
Eligible shareholders will have the chance to apply for up to $30,000 worth of new securities under the share purchase plan, free of transaction and brokerage costs. The offer price per new security will be less than the placement price and a 2.5 per cent discount to the five-day VWAP.
GUD last traded for $11.83 on Wednesday, November 18.
