News: AHG UPDATE 1-Automotive Holdings backs AP Eagers' sweetened $586 mln offer

(Adds value of offer increase, target company quote)

May 8 (Reuters) - Australian listed car dealer Automotive Holdings Ltd (AHG) recommended a takeover proposal from larger rival AP Eagers (APE) on Wednesday after the suitor raised its indicative offer to A$836 million ($586.2 million).

AP Eagers, which is already Automotive's biggest shareholder, sweetened its all-shares offer from A$792 million, an increase of 5.5 percent and a 5 percent premium to Automotive's share price close the previous day.

The bid comes as weaker consumer spending is fueling market speculation about consolidation in the retail automotive sector.

Automotive Holdings in February reported a loss for the first half due to tough retail conditions. New vehicle sales in Australia fell by about 8.9 percent in April from a year earlier, according to the Federal Chamber of Automotive Industries.

"The improved offer provides Automotive Holdings shareholders with the opportunity to continue their exposure to any future growth in its earnings and value," Automotive Holdings Chairman Richard England said.

($1 = 1.4261 Australian dollars)