Perth-based Automotive Holdings Group (AHG) has until the end of this week to get the $400 million sale of its refrigerated logistics division to Chinese group, HNA, over the line and done.
Seven months after agreeing terms to what was described as a “game changer”, Australia’s biggest car dealer will struggle to get the deal done with the debt-laden HNA.
Brokers say that given the time the deal has taken so far and HNA’s well-publicised financial problems, the deal may not happen at all.
AHG reiterated last week that it was endeavouring to close the sale by the deadline. But the company’s shares are weakening as doubt rises about the deal – an extension for HNA is possible, but would be unconvincing.
AHG’s share price has also been hit by the May profit warning on the back of unexpectedly weak car sales, especially in the East Coast markets.
Its biggest shareholder, AP Eagers has taken advantage of the weakness to snare cheap stock, using the “creep” provisions to lift its stake to 25.8%.
AHG shares rose 1.7% yesterday to $2.87, close to the six year low of $2.77 hit the week before last. The shares are down 21% year to date. The hit a 2018 high of $3.18 in March.
AHG’s refrigerated business has an annual turnover of $600 million from the Rand, Harris, Scott’s and JAT brands, providing transport and cold storage services across mainland Australia, 600 prime movers and 1200 road trailers. Three years ago AHG cut 200 jobs and while the business has done well since, it has not generated the returns the market wants to see.
Some rivals reckon the $400 million HNA is prepared to pay is too much and that the delay is an attempt by the Chinese company to cut that price or postpone it.
AHG would net $280 million from the terms announced in November, giving the group some $300 million to either buy more dealerships or finance a capital return to shareholders.
HNA’s difficulties have seen Chinese government regulators force it to sell assets to reduce debts which are reported to top $US50 billion. HNA has a stake in Virgin Australia and a string of local properties, some of which are being sold.