Why the Applegreen share price surged 40% in a single day

The Applegreen (LSE:APGN) share price jumped a massive 40% in a day on Thursday. The AIM-listed firm added a whopping £176m to its market cap inside 24 hours. And it all came down to one juicy detail that had shareholders grinning.

In early trading on 10 December, the Applegreen share price soared to a two-year high of 505p. In fact, it was the biggest gainer across the entire AIM index. The last time shares were this valuable was pre-pandemic, in early February 2019. 

The Irish petrol forecourt retail operator is one of the 100 largest companies listed on the UK AIM market. This is the smaller cousin of the FTSE 100 and FTSE 250. The company sits alongside the likes of Boohoo, ASOS, and Fevertree, but is perhaps not a household name. One of the most recognisable retail brands owned by Applegreen is Welcome Break. It is Ireland’s largest and the UK’s second-largest motorway service area operator.

Luck of the Irish

So why did the Applegreen share price spike so much? In a regulatory news update to the London market on the morning of 10 December, Applegreen said it had received a takeover offer of €5.75 per share.

Applegreen said it was in “advanced discussions” with a consortium of companies including 41% owner B&J Holdings Limited. Because B&J already own such a large stake in the company, it is seen as more likely to go through with the takeover bid. That is, compared to an outside company with no current shareholding.  

The takeover price represents a 48% premium above to the Applegreen share price at the close of play on 9 December. 

The board of directors said it would recommend shareholders take the cash offer if it materialised.  “[It] would represent a compelling opportunity for shareholders in Applegreen to realise their investment at an attractive premium to the prevailing share price,” they said.

Taking over

Takeovers can mean big profits for shareholders. That’s especially true if the buyer offers a premium for the company’s shares. It means instant profit, basically. So the Applegreen share price stabilised 146p higher than it was the previous day. 

A couple of months back, City broker Berenberg slashed its price target for Applegreen from 630p to 450p. Analysts said the operator was “better placed” than most other companies that rely on large amounts of travel for their sales and profits. But it noted that there had been a “significant hit” to the volume of traffic on the roads, which hurt earnings in the first half of the year. 

The amount of debt the business is carrying was also a concern for the equity researchers. 

Thursday’s Applegreen share price of 505p (£5.05) matches the €5.75 offered by the buyer, after taking into account the 1.1 times conversion from pounds to euros. 

Applegreen share price future

Applegreen bosses have been taking advantage of cheap interest rates to use loans to expand quickly into new markets. Its shops on British petrol station forecourts are its main business.

But since 2017 the firm has been expanding into the US. This expansion strategy started on the east coast. It continued with a 10-year leasehold deal for 46 midwest petrol filling stations in mid-2019.

Then in September this year, Applegreen announced it had won a 33-year lease to design and build 27 motorway service areas on New York’s longest toll road.