Pendragon's Stratstone armPendragon's Stratstone arm


Get-out clause for Lithia in Pendragon deal if 30 per cent of car makers don’t back deal

  • Conditions in small print reveal Lithia wants backing from 70 per cent of car makers first
  • Car manufacturers must sign off on sale of their dealerships to another party
  • Combined dealer group would have large percentage of luxury car brands’ dealerships

Time 7:14 am, September 20, 2023

Lithia Motors could pull out of its £250m deal to buy Pendragon’s car dealerships if more than 30 per cent of car manufacturers the group represents don’t agree to the sale.

Buried in the terms and conditions of the proposed offer, the companies have added a clause that allows American bidders Lithia to pull out if too many car manufacturers don’t back the bid.

Car makers have to sign off on the sale of their franchises to another party and many are often unsettled by large transactions such as this.

Some car makers are known to be particularly unnerved when one dealer group owns a large percentage of their dealership network.

Sources explained that Pendragon and Lithia will have to work hard with its manufacturer negotiations to ensure they are comfortable with the change in ownership.

Lithia and Pendragon have been contacted for comment.

The conditions of the asset sale, announced on Monday by the firms, say Lithia wants ‘consent to the disposal’ from OEMs ‘representing, in aggregate, not less than 70 per cent of the profit before tax generated by the trading dealerships’.

‘Lithia have worked in a clause that allows them to pull out if a certain proportion of the manufacturers Pendragon owns don’t allow the sale of their sites,’ said a source.

‘While this isn’t unusual, it does mean the firms will have some work to do convincing the car makers of the benefits of the deal especially as they’ll be huge partners for some brands as a combined group.’

As a result of Jardine and Pendragon merging under Lithia, the group would hold 10 Porsche dealerships, 13 Jaguar, nine BMW and Mini, five Aston Martin and two Ferrari.

That equates to more than 20 per cent of Porsche dealers in the UK and 20 per cent of Aston Martin’s according to the most recent numbers of dealerships collated by Car Dealer earlier this year.

Porsche, Ferrari and Aston Martin have all been approached for comment.

Marshall Motor Group lost all 19 of its Toyota and Lexus sites in the summer. It came after  Constellation Automotive Group snatched Marshall off the Stock Market last year.

Marshall bought the Toyota and Lexus dealerships as part of its £64.5m acquisition of Motorline in October 2021 and was the second biggest partner for the Japanese brand behind Steven Eagell.

Those dealerships made up nearly half of all the sites Marshall bought from Motorline and they were a significant reason for doing the deal in the first place.

Steven Eagell bought 10 of the Marshall dealerships ironically cementing its position as the largest Toyota and Lexus dealership group in Europe. 

Helston Garages portfolio of dealerships was also split up when it was sold – the lion’s share went to Vertu, while Yeomans picked up a large number of VW Group sites.

David Kendrick, CEO of UHY Hacker Young, told Car Dealer: ‘This clause does not surprise me being honest and 30 per cent actually seems a very low number. 

‘Lithia are a hugely respected and scaled business outside of the UK, as well as now representing a good number of brands in the UK having purchased Jardine, therefore I really don’t see this as an issue. 

‘Of course any OEM will want to get comfortable with the new owner, as with any transaction, however it’s always a delicate balance between the exiting operator gaining fair value for their business in an open market scenario vs the OEM looking to implement a network plan and having a material influence on the destination of the business. 

‘Clearly the Constellation acquisition of Marshall’s highlights how OEMs can react to change of ownership with the Toyota / Lexus division being divested off. Always a key consideration for any existing dealer or group, but one that needs to be managed carefully.’

James Baggott's avatar

James is the founder and editor-in-chief of Car Dealer Magazine, and CEO of parent company Baize Group. James has been a motoring journalist for more than 20 years writing about cars and the car industry.

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