9:51 am, September 18, 2023
A simple majority of 51 per cent of shareholders is all that is required to push Lithia’s proposed £280m deal for Pendragon’s motors business through.
A spokesperson for Pendragon confirmed to Car Dealer that as this deal is categorised as a ‘class 1 transaction’ a simple majority is all that is required to get the deal done.
This is critical as it means Swedish firm Hedin won’t be able to block the deal, as it did previously.
Hedin – a 26 per cent shareholder in Pendragon – would have been able to block the deal if it required a 75 per cent backing of shareholders.
The firm, which previously launched its own aborted bid to buy Pendragon, said it planned to block any rival bids for the dealership group.
However, it will not now be afforded that luxury. As this deal is an asset sale rather than a full company takeover, the majorities required to push it through are different.
Lithia and Pendragon have cleverly structured this deal and, on the face of it, it looks like a bargain for Lithia.
It’s effectively paying £250m for the dealerships and profitable leasing business – a veritable Aldi middle aisle offer when compared to the £300m it shelled out for 50-site dealer group Jardine earlier this year.
Pendragon has 160 sites in the UK and represents 21 different manufacturers.
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By removing Pinewood from the deal, the firms have essentially parked the issue of the £260m High Court claim that’s still ongoing. That battle revolves around a reseller’s claims against Pinewood for a deal in the Far East that went sour.
This new, carefully-structured proposed deal spins off Pinewood and leaves Lithia with what it wanted all along – the dealerships and leasing business.
The firms have said they will work together on a Pinewood ‘joint venture’, which will remain on the Stock Market, but by hiving it off, they also sideline the court case headache that by all accounts put Hedin off its own bid.
It has also offered an extra carrot to Pendragon shareholders as they will retain 83.3 per cent ownership of Pinewood while also getting a dividend worth 16.5p for its dealer group and leasing assets.
Hedin remains tight-lipped on what it thinks of the deal. Car Dealer sent boss Anders Hedin an email to ask him for his thoughts, but so far he hasn’t responded.
Liberum analyst Sanjay Vidyarthi also noted the absence of Hedin’s name from those shareholders giving irrevocable undertakings to sell their shares.
The shareholders currently backing the deal include Schroder Investment Management Limited, Briarwood Capital Partners LP, Hosking Partners LLP, Farringdon Netherlands BV, Huntington Management LLC, and Sir Nigel Rudd, as well as the Pendragon board.
However, Vidyarthi is unsure of whether a rival bid would be forthcoming from the Swedes.
‘Would he want to pay more than 27.4p in the current market? – I’m not sure,’ he told Car Dealer.
‘I think the deal and pricing have been cleverly structured in that respect.’
In a note to analysts, he said the Lithia offer values Pendragon at 8.5 times earnings and is ‘in line’ with the deal that has taken Lookers off the stock market.
Whether the Lithia offer deal is effectively done now rests with the shareholders, but with the threshold now set at a much lower bar, and the blocking option for Hedin removed, it certainly looks a lot more likely to go through than previous bids.
