The Eagers Automotive Ltd (ASX: APE) share price is on the move after the company announced a $205 million acquisition.
The company could also benefit from the fuel excise cut included in last night’s federal budget, according to UBS.
At the time of writing, the Eagers Automotive share price is $14.54, 3.19% higher than its previous close.
Let’s take a closer look at today’s news from the car, truck, and bus dealership.
Eagers Automotive share price up on acquisition news
The Eagers Automotive share price is launching higher on news the company is paying approximately $205 million to buy a portfolio of dealerships and properties in the ACT.
The portfolio, currently owned by WFM Motors, brings in a turnover of around $450 million annually.
The dealerships represent brands including Toyota, Ford, Volkswagen, Jeep, Lexus, Subaru, Mitsubishi, Volvo, and GMSV.
They span across 10 owned properties and three leased properties.
The portfolio also employs around 400 people, all of whom will be retained after the acquisition.
Eagers Automotive CEO Keith Thornton noted the ACT is a “key strategic region” for the company.
Thornton said the territory presents an “opportunity to grow our national footprint … [offering] immediate scale and scope for future growth”.
“The portfolio is high performing, representing leading manufacturers, and is situated in prime operating locations around Canberra,” Thornton continued.
The acquisition is subject to a number of conditions, including shareholder approval. Eager Automotive expects investors will get their say in July.
Additionally, UBS equity strategist Richard Schellbach identified the company as one that could get a boost from the federal budget’s fuel excise cut, as reported in the Australian Financial Review.
If motorists return to roads in droves as some predict, so too will their cars to service centres. That’s good news for Eager Automotive.
The equity strategist also noted the potential for the change to spur an increase in new car sales. Of course, that would likely be good news for Eagers Automotive’s bottom line and, in turn, its share price.
The post Here’s why the Eagers Automotive (ASX:APE) share price is climbing today appeared first on The Motley Fool Australia.
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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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