Shares in AMA Group Limited (ASX: AMA) were trading as much as 13% higher today after successfully raising approximately $179 million via a share placement and institutional entitlement offer.
About AMA Group
AMA Group operates a chain of collision repair centres and services workshops for brakes and transmissions. AMA is a manufacturer and wholesale distributor of alloy vehicle protection equipment, and automotive and electrical accessories. The Group has more than 100 panel repair shops across the country.
What’s Happened?
Today, the company announced the successful completion of an institutional share placement, along with the institutional component of its fully underwritten 1 for 4.5 pro-rata accelerated non-renounceable entitlement offer. The offer meant that new shares were issued at $1.15, a 6% discount to yesterday’s closing price.
A retail entitlement offer is set to follow, opening on Tuesday next week and is expected to raise a further $36.7 million. Eligible shareholders who own shares in the company as at the close of business today will be able to acquire an additional share for every 4.5 shares owned at an offer price of $1.15.
With more than $215 million expected to be raised by the conclusion of the retail entitlement offer, AMA will use the proceeds in order to finance the acquisition of the Capital S.M.A.R.T Group business from Suncorp Group Limited (ASX: SUN).
Capital S.M.A.R.T is the banking and insurance giant’s market leading smash repair business in Australia and New Zealand.
Looking Ahead
Company CEO Andy Hopkins was delighted with the uptake from institutional shareholders saying; “We are very grateful for the strong support our institutional shareholders have shown for the acquisition and AMA’s growth strategy. The acquisition of Capital S.M.A.R.T represents an exciting opportunity to combine AMA’s industry leading platform with Capital S.M.A.R.T’s best in class capabilities in low to medium severity panel repairs. The management team is now focused on successfully completing and integrating the acquisition.”
In an investor presentation given by the company earlier this week, management revealed high expectations for the enlarged business, forecasting that the S.M.A.R.T acquisition will add materially to profits right from the first year.
These high expectations are likely to have caused many analysts to upgrade their profit forecasts for the coming years, which is today translating into a higher share price.
With the AMA share price at $1.32 at the time of writing, shares are currently trading on a considerable premium to the $1.15 offer price.
Would I Buy Shares Now?
To be honest, AMA Group has not been a stock I’ve followed closely in recent times. However, with strong earnings growth predicted it might be worth a closer look.
In a subdued economic environment, any company with the ability to generate strong profit growth year-on-year might be worth serious consideration.
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At the time of publishing, Luke has no financial interest in any companies mentioned.
