If you read the ATL release it states that THL (not ATL or THL and ATL) has entered into exclusive negotiations with Next Capital to sell the assets. So this suggests that the merger deal isn't going to be amended for the change. While ATL shareholders who hold onto THL shares post merger may indirectly be impacted by a decline in overall synergy benefits, ATL shareholders are only going to own 25% of the enlarged entity. For me the merger proceeding is the best short term outcome for ATL shareholders, as it does away with the requirement to recapitalise ATL to enable fleet sizes to increase as tourism recovers. Given the current ATL shareholder base, there is a reluctance to dilute existing shareholders through a capital raise, this is a challenge for a stand alone ATL.
If Next Capital has exclusive status, this infers they are eager to secure the assets.
From a THL perspective, the sale of part of the ATL business frees up some cash/reduces required borrowings to assist their future fleet number growth.
Given the eagerness of THL to press ahead with the merger, there must still be significant benefit available in other segments of the Australia and New Zealand markets, but also presumably in North America and Europe. North America is historically a profitable market.
While there may not be significant barriers to entry, there are plenty of operators that were around pre-COVID who have become insolvent, including Jucy rentals. Market presence is not the holly grail but profitable market segments are.
ATL Price at posting:
39.5¢ Sentiment: Buy Disclosure: Held
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