Lithia Motors’ bid for Pendragon’s car dealerships and leasing arm moved a step closer to success today as another rival pulled out of the race to buy the listed business.
AutoNation confirmed in a London Stock Exchange announcement after market closed today that it does not intend on making an offer for Pendragon.
Brit Mike Manley, who leads AutoNation, is said to have asked advisors last week to conduct more due diligence work on the UK listed car dealer business after Lithia increased its bid to the equivalent of 35.4p per share.
AutoNation had previously tabled a 32p per share offer and it is believed bosses at America’s largest car dealer group were considering upping this to 38p.
However, today’s note to investors said: ‘Following Pendragon’s announcement made on 26 September 2023 regarding a possible offer to be made for Pendragon by AutoNation, AutoNation confirms that it does not intend to make an offer for Pendragon.’
Hedin and Penske Automotive, who had also tabled a 32p per share offer for Pendragon, have already said they do not intend to up their bid.
The move clears the way for Lithia’s increased offer to be given the nod by shareholders at a meeting next Wednesday (October 25). Investors will get a special dividend worth 24.5p per share if the deal goes through.
It is not yet known how Hedin – a near 28 per cent shareholder in Pendragon – will vote, but the deal needs a simple majority to go through.
Lithia’s offer values Pendragon’s dealership assets – which operate under the Stratstone and Evans Halshaw names – at £397m.
Lithia will also invest in Pinewood, Pendragon’s DMS arm, which is currently subject to a High Court case, as part of the deal.
Pinewood will take Pendragon’s place on the Stock Market with Bill Berman, current CEO, running the firm. Berman is set to cash in to the tune of £5m if the Lithia deal goes through.
If the deal does get the nod, it will make Lithia the second largest car dealer group in the UK based on annual revenues with £5bn of turnover to its name, behind Sytner in first with £5.7bn.
The Car Dealer Top 100 ranks dealer groups by profit which would put the combined group in third place – adding Jardine and Pendragon’s 2021 EBITDA profit equals £231m, behind Arnold Clark in first (£398m) and Sytner (£246m).
Boss of deal making accountancy firm UHY Hacker Young, David Kendrick, told Car Dealer: ‘This is interesting. To some extent it doesn’t surprise me as the valuation was getting to what I would class as a full-up value based on other market compatibles.
‘It looks like Lithia will be successful in the purchase as predicted some weeks back.
‘The question now is whether AutoNation turn their attention to Vertu which looks extremely good value still with some great assets in the portfolio.’
Jardine’s former boss and now Lithia UK regional president Neil Williamson has already been lined up to run the larger group.