Northgate and Redde agree all-share merger
Vehicle hire company Northgate said on Friday that it has agreed an all-share merger with Redde.
Under the terms of the deal, Redde shareholders will be entitled to receive 0.3669 new Northgate shares for each of their shares. Northgate will own around 54% of the merged group, while Redde will own the rest.
The companies said the new group, Redde Northgate, will be "a leading integrated mobility solutions platform with the scale, reach and resources to provide customers with a comprehensive suite of mobility services and the potential to deliver substantial benefits to shareholders, customers, employees and other stakeholders".
They expect the merger to generate pre-tax cost synergies of at least £10m a year, with target run-rate phasing of £7m at the end of the first 12 months after completion and £10m at the end of the second year after completion.
They pointed to "significant opportunity" for revenue synergies due to the ability of the combined group to cross-sell and offer new products and services to existing and new customers.
Northgate’s non-executive chairman, Avril Palmer-Baunack, said: "The combination will create a champion automotive services business with scale, reach and resources to provide mobility solutions to a broad customer base.
"The merger has compelling strategic logic - delivering an enlarged platform providing enhanced mobility solutions for vehicles and their users throughout the automotive services value chain."
Redde’s chair, John Davies, said: "Combining Redde's talent with Northgate's scale and market-leading presence creates a platform business that has much potential and I am particularly looking forward to working with a highly talented management team, which has proven skill and vision to drive shareholder value."
News of the merger came alongside Northgate’s interim results, which showed a 13.8% decline in pre-tax profit to £24.8m and a 4.3% dip in revenue to £357.8m.
Vehicle hire revenue was up 2.5% during the half to £265.9m, but revenue from vehicle sales slumped 19.7% to £91.9m. Northgate pointed out that in the same period a year ago, a higher number of vehicles were disposed of, mostly due to the acquisition of TOM vehicles.
At 0910 GMT, Northgate shares were down 3.4% at 338.05p and Redde shares were up 5.8% at 114.98p.