8:20 am, July 27, 2023
Lookers’ directors have agreed to an increased recommended cash offer by Global Auto Holdings to buy the dealership chain.
An announcement issued this morning via the London Stock Exchange (LSE) said the new bid of 130p per share versus an earlier one of 120p for Lookers’ entire issued and to-be-issued share capital had switched to a takeover offer.
The fresh offer by the Canadian group to take Lookers off the stock market values the company at £504.2m and follows rumours that another bid was imminent after Cinch dropped its support for the earlier bid by Global Global Auto Holdings.
Because the increased bid is to be carried out via a takeover offer, the Lookers board is to propose a resolution indefinitely adjourning court and general meetings that were due to take place today and they won’t be rescheduled.
Today’s announcement issued by Global Auto Holdings said: ‘The Lookers directors, who have been so advised by Numis and Peel Hunt as to the financial terms of the increased offer, consider the terms of the increased offer to be fair and reasonable.
‘In providing their advice to the Lookers directors, Numis and Peel Hunt have taken into account the commercial assessments of the Lookers directors.
‘Accordingly, the Lookers directors intend to recommend unanimously that Lookers shareholders accept, or procure acceptance of, the increased offer.’
Support for the earlier bid was withdrawn by used car outfit Cinch – owned by Constellation Automotive Group, which looked instead to be favouring a 130p-per-share offer.
At the moment, letters of intent supporting any acquisition stand at about 11 per cent of Looker’s issued share capital. The new offer needs 75 per cent backing to take Lookers off the stock market.
Constellation owns just under a fifth of Lookers via Cinch, making it Lookers’ largest shareholder and crucial to the new bid.
David Kendrick, chief executive at chartered accountants UHY Hacker Young, told Car Dealer today: ‘The increased bid is now for the shareholders to vote on.
‘Constellation indicated the previous bid wasn’t acceptable and that 130p was the target price which has now been met.
‘A vote will take place and assuming it’s accepted the deal will then move forward, subject to OEM and Financial Conduct Authority approval.’
He added: ‘Exciting times after it looked like the deal may have been dead.’
Sanjay Vidyarthi, support services and special situations analyst at investment bank Liberum, told Car Dealer that a scheme of arrangement needed 75 per cent of shareholders to vote in favour for the deal to happen and only then can the shares be acquired.
He said: ‘A takeover means that Global Auto will buy the shares directly from shareholders at 130p, whoever is willing to accept.
‘If 75 per cent accept, the shares will be delisted, but 90 per cent need to accept for the remaining minority to be forced sellers.
‘This puts more pressure on Cinch to accept or be left with a shareholding that is illiquid [not easily converted into cash].’
But he added: ‘The acceptance level can be as low as 50 per cent for the increased offer to go through.’
Car Dealer contacted Constellation about the latest move by Global Auto Holdings and decision by Lookers but it declined to comment.
To finance its new offer, Global Auto Holdings – referred to as Bidco in LSE documents – has entered into an agreement with the Bank of Montreal, Fédération des caisses Desjardins du Québec and National Bank of Canada among others that increases an interim term loan of $615,000,000 (circa £360,146,118) to $666,165,192 (£390,136,026).
A new offer document is now set to be published within 28 days, with the last date for fulfilling the acceptance falling 60 days later.
Lookers’ shares were 95p each yesterday – down 3.06 per cent – when the markets closed.
Story originally published at 8.20am and updated at 9.41am with the comment from David Kendrick, at 10.28am with Constellation’s response, and at 12.35pm with Sanjay Vidyarthi’s comments
