Darlington van hire company Northgate is a step closer to becoming part of a £1bn company through a merger with fleet management firm Redde Plc.
The company will be renamed Redde Northgate plc as part of the deal, which has already been approved by shareholders of both companies.
Redde – which operates as a support services group, providing its clients with accident management support, legal services, fleet management, and policy fulfilment services – and Northgate have both now announced that the SRA has given the requisite approval for the recommended all-share merger.
That means the deal has now met all of the conditions relating to regulatory approvals and now just remains subject to the satisfaction or, where applicable, waiver of certain remaining conditions, including the sanction of the Scheme by the Court.
A stock market announcement said: “As announced today by Redde, the court hearing to sanction the scheme is expected to take place on 20 February 2020 and the Scheme is expected to become effective on 21 February 2020 with admission of the new Northgate shares occurring at 8am on 24 February 2020.”
Northgate shareholders will walk away with a bigger stake in the new company and will own 54% of the business, while Redde shareholders will retain a 46% stake.
When the merger was first mooted last November, the boards of the two firms said they expected the newly combined firm to be able to make pre-tax cost synergies of at least £10m a year.
The cost savings were planned to be made by merging Northgate’s and Redde’s corporate and support functions, accounting for around 45% of the savings.
Consolidating the two businesses’ branch network will also account for around 35% of the cost savings, enabling the removal of branch overlap, and the remaining 20% of the cost savings were to be made across the new firm’s accident and fleet management division.
When the two firms first revealed their plans they said the combination would “create a champion automotive services business with scale, reach and resources to provide mobility solutions to a broad customer base”.
Avril Palmer-Baunack, non-executive chairman of Northgate, said at the time: “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. 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.”