(Alliance News) - Vehicle services firms Northgate PLC and Redde PLC agreed Friday to an all-share merger to create a firm with a market capitalisation of nearly GBP800 million, whilst Northgate also reported "solid" interim results.
Shares in Northgate were 3.3% lower at 338.51 pence in London on Friday. Redde up 5.9% at 115.00p.
Under the terms of the merger, each Redde shareholder will receive 0.3669 new Northgate shares for every Redde share held. After completion, Northgate shareholders will control 54% of the combined company and Redde investors the remainder.
Northgate and Redde explained the merged firm - to be called Redde Northgate PLC - had a "compelling strategic logic" which will deliver cost savings as well as establish a complimentary and comprehensive suite of mobility services.
"The combination will create a champion automotive services business with scale, reach and resources to provide mobility solutions to a broad customer base," Northgate Chair Avril Palmer-Baunack said.
"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," Palmer-Baunack added. "Both boards have identified significant cost synergies and opportunities for revenue cross-sell. This merger represents an attractive opportunity for both companies to further enhance their market-leading positions, delivering synergies, customer benefits and shareholder value."
Northgate and Redde expect the combination to result in annual cost savings of around GBP10 million by the end of the second year following completion.
In a separate announcement, Northgate provided its interim results.
For the six months ended October, pretax profit declined 14% to GBP24.8 million from GBP28.7 million the year prior. This was after revenue fell 4.3% to GBP357.8 million from GBP374.0 million the year before.
Results were hurt by a steep fall in vehicle sales during the period, down 20% to GBP91.9 million from GBP114.5 million the year before. Vehicle hire revenue rose 2.5% to GBP265.9 million from GBP259.5 million a year prior.
"These solid results in this period reflect the strength of the core business in rental operations in H1 against a backdrop of political and economic uncertainty in both markets," Northgate Chair Avril Palmer-Baunack said.
Northgate proposed a 6.3 pence per share interim dividend, up 1.6% from 6.2p a year prior.
"The business continues to look to adjacent sectors to build on its solid rental foundations so that it meets the demands of its customers who are increasingly looking for a full end-to-end product offering", Palmer-Baunack added.
By Ahren Lester; ahrenlester@alliancenews.com
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