12:17 pm, January 9, 2023
Listed car dealer group Pendragon is facing a $313m (£260m) claim from a reseller of its Pinewood technology.
The dealer group – subject of a takeover bid until recently by Swedish firm Hedin – is facing a court case lodged by Pinewood Technologies Asia Pacific Ltd.
The case – number HT-2022-000244 – is set to be heard in the Technology and Construction Court, a division of the High Court.
No date has yet been set for a hearing, but the latest correspondence for the case was filed with the court just before Christmas.
The case has not been announced to the Stock Market and the reports have just been uncovered by Car Dealer.
The court case is rumoured to be the ‘main reason’ the deal with Hedin did not go through, according to sources.
Hedin publicly blamed ‘challenging market conditions’ for not going ahead with its 29p per share bid for Pendragon at the start of December.
Hedin has been approached for fresh comment.
Paul Daly, automotive partner at accountants UHY Hacker Young, said this claim was for a ‘substantial sum’ that would have come out in the due diligence process that both companies entered into after the bid was announced.
He said: ‘This is clearly a large claim and could credibly have caused the deal to fall over. That’s clear cut to me.
‘During due diligence this would have had to have been disclosed and it would have worried the banks Hedin would have been working with.
‘It would have definitely come out at that point and if it was judged that there was a material risk that it could crystallise into a claim then that would likely put off a buyer until it was resolved.’
Pendragon told Car Dealer it ‘doesn’t comment on live litigation’.
According to a report first filed on the legal website Law360.com, the reseller of the software claims Pinewood failed to change the dealership system to fit legal requirements in different markets.
They say this specifically blocked the company from launching in Japan.
The case was lodged with the High Court in August at the same time Lithia Motors was named as the mystery bidder that tried to buy Pendragon.
Reports suggest that Pinewood PLC did a deal with Pinewood Technologies Asia Pacific Ltd in 2017 to cover the Hong Kong, Philippines, Vietnam and Thailand markets.
This was said to have been extended with a new deal to cover Japan in 2019. Both these agreements have now been terminated.
Pinewood Technologies Asia Pacific said it set up marketing for the business and hired staff to service it. The agreement required the reseller to pay Pinewood PLC every month for each account it set up.
However, issues allegedly arose over ‘localising’ the technology for the markets in Japan and Vietnam and the relationship broke down.
Pinewood Technologies Asia Pacific wants the High Court to find that it had rightly cancelled one agreement and that the other had been broken by Pinewood PLC. It is claiming damages for lost profits and unnecessary costs it paid out.
Pinewood PLC has since pushed back at the claims and insisted that in fact the reseller breached its contracts by failing to pay outstanding debts.
It filed a defence and counterclaim in November.
The defence says the agreements were terminated in May 2022 over unpaid bills. Pinewood also denies Pinewood Technologies Asia Pacific’s claim that it violated the two reseller agreements.
The Technology and Construction Court said a date of when the case will be heard has not yet been set.
Pinewood Technologies Asia Pacific has been contacted for comment.
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