7:14 am, June 20, 2023
A privately owned Canadian car dealer group has agreed a deal to buy Lookers for £465.4m.
Alpha Auto Group (AAG) – a Toronto based car dealership business – has offered 120p per share.
Yesterday, shares in Lookers closed at 88.7p. This morning they had leapt to 118.6p.
The Canadian business was launched in 2014 and has just 22 sites in the US and Canada.
Despite the small number of dealerships, AAG turned over $1bn in 2022 and generated EBITDA profits of circa $100m, according to a spokesperson for the firm.
Lookers told the Stock Market this morning that they have agreed the ‘all-cash’ offer and have recommended it to shareholders.
The deal is expected to be concluded in late Q3 or early Q4 this year.
A bidding vehicle, called Global Auto Holdings Limited, will be used for the purchase. It said it believed the deal was an ‘attractive opportunity’ to enter the UK market.
Constellation Automotive Group – the owners of Cinch – which bought a 20 per cent share in Lookers has agreed to sell its holding as part of the deal.
It bought the blocking stake in the business after they swooped on shares owned by Tony Bramall in a deal worth £80m.
AAG says it has irrevocable undertakings from 42.1 per cent of its shareholders. It required more than 30 per cent to be able to offer for the whole company, by receiving the 42 per cent nod, including from directors, it looks like the deal will go ahead.
Lookers directors, who have been advised by Numis and Peel Hunt, said they consider the terms of the offer to be ‘fair and reasonable’.
Lookers directors added: ‘In assessing the offer, the Lookers directors recognise that there is inherent cyclicality in the auto retailing market, a significant ongoing structural transformation towards electric vehicles, as well as other factors such as inflation, macro-economic uncertainty, development of overseas supply chains, and structural changes to the distribution model, which create uncertainty for the medium-term market outlook.
‘As a result, the offer represents an attractive opportunity for Lookers shareholders to accelerate and de-risk this value creation opportunity and realise an immediate cash exit for their investment at a significant premium to the prevailing share price.’
Lookers’ annual results for 2022 showed an increase in revenue last year to £4.3bn with the firm making pre tax profit of £82.7m.
Lookers reported a ‘robust balance sheet’ that had net cash of £66.5m, plus a property portfolio worth £290.5m, equivalent to a combined 92p per share.
It operates more than 150 dealerships across the UK.
David Kendrick, CEO of deal making accountancy firm UHY Hacker Young, told Car Dealer: ‘We have talked about the undervaluing of the UK plc’s for some time now, so this approach does not surprise me in the slightest.
‘It was only a matter of when, not if!
‘Lookers went through some challenging times which are clearly behind them now, so it looks fantastic value even at 120p a share.
‘A new entrant mixes things up too if it does happen – exciting times again.
‘With profitability continuing to remain strong and multiples low compared to many other international markets, it’s no surprise we have been inundated with many new potential interested parties looking to enter the UK! Watch this space.’
Lookers has had a chequered few years. In 2020 it was forced to suspend its shares after delaying the publication of its accounts for 2019. It eventually relisted them in 2021. It was also subject of a potential merger with fellow listed car dealer business Pendragon which quickly fell flat on its face.
Kuldeep Billan, director of Bidco and founder and executive chairman of AAG, said: ‘The proposed acquisition of Lookers represents a compelling opportunity to acquire one of the leading UK auto retail groups while partnering with fantastic OEM brands and Lookers’ approximately 6,500 strong team members.
‘We look forward to further building upon Lookers’ strong OEM relationships by being a trusted and reliable retail partner while delivering strong volumes and a high level of customer experience across a range of OEM ‘go to market’ strategies.
‘With the UK auto retail market undergoing substantial change, including the adoption of new distribution models, we believe that the wider group is well positioned to navigate the current environment with geographically diversified operations and a focus on operational excellence.
‘The group will benefit from the continuity of Lookers’ Executive Team, our shared values and an unwavering commitment to operating with the highest levels of integrity for the benefit of all stakeholders. We are deeply committed to the UK and look forward to further establishing our presence in the market over the long term.’
Mark Raban, Lookers CEO, added: ‘Today’s offer reflects the transformational progress that has been made in recent years.
‘We have harnessed our strong market position, enhanced our brand relationships, and executed well against our six strategic priorities.
‘I am excited about the combination with Bidco. It will create a business of greater scale, and bring together two successful businesses with complementary OEM relationships, and a strong platform to support future growth in the UK.’
What we know about the deal on video
Lookers key events:
December 2018 – Lookers launches independent internal audit into sales process. It eventually finds ‘control issues’ in sales process where ‘improvements’ are needed. Findings handed to FCA.
June 2019 – FCA launches review into sales processes at Lookers between January 2016 and June 2019. Lookers cannot ‘estimate what effect, if any, the outcome of the investigation may have’.
November 2019 – Chief executive Andy Bruce and chief operating officer Nigel McMinn leave firm abruptly
March 11, 2020 – Lookers delays results saying in final stages of preparation ‘potentially fraudulent transactions’ in one division were discovered. Promises results in April.
April 2020 – Fraud investigation deepens. £4m charge revealed and firm says there could be more. Delays accounts to June.
May 2020 – Pendragon CEO Bill Berman admits he wrote to Lookers to discuss a merger and updates Stock Market to that effect. Move described as ‘two drunk men bumping into each other in a bar’.
June 5, 2020 – Lookers says it will axe 12 dealerships, cut 1,500 jobs.
June 9, 2020 – Lookers says it will suspend shares on July 1. Delays accounts for the third time and says they’ll be published ‘no later than the end of August 2020’.
August 20, 2020 – Accounts delayed for the fourth time and no promise given as to when they’ll be published.
October 31, 2020 – Long standing Lookers non executive director Tony Bramall, one of the group’s major investors, bought forward the date he would leave the board to the end of December. No reason was given for his early departure.
November 25, 2020 – Lookers finally release their annual accounts for 2019 showing a statutory loss for 2019 of £45.5m. Promise interim results in December and the hopeful reinstatement of shares on Stock Market.
January 29, 2021: Lookers shares relisted on the Stock Market as experts said they hoped the ‘legacy issues’ were behind the business.
February 2, 2022: Constellation Automotive Group buy Tony Bramall’s shares in an £80m deal. It gives the firm that owns WeBuyAnyCar and Marshall’s a 20-per cent blocking stake.
