Automotive Solutions Group: The gift that keeps on giving

Automotive Solutions Group: The gift that keeps on giving

I keep telling myself ‘this is the last time I’m writing about ASG’ but the Automotive Solutions Group Ltd (ASX: 4WD) saga has been too good to pass up. AMA Group Ltd (ASX: AMA) today offered to buyout the ~80% of Automotive Solutions it doesn’t own – at a 0% premium to yesterday’s close.

Pretty rough on shareholders, who would be accepting a 65% haircut to the listing price. However, the way the saga has played out has made such a situation nigh-on unavoidable. In between underperformance, sacking the CEO, suing their own employees, and making errors in quarterly forecasts, the company has not endeared itself to a takeover at a premium.

In fact AMA is taking on a considerable amount of unknown risk, plus potentially heavy short term costs (e.g. in terms of cash outflows) by making the bid. Yet it has the deep pockets and experience to weather the short term losses of turning around ASG. Plus I believe that AMA management is going to be a lot easier for the business operators to get along with compared to ASG.

In one sense I think Automotive Solutions shareholders are getting robbed, as the business does look very cheap. On the other hand, there have been a lot of red flags which prevented me from investing. Still, I think it will be better for all involved if this story is brought to a quick close.

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