11:04 am, July 20, 2023
Rumours in the industry are rife that a new bid is imminent for listed car dealer group Lookers.
Several well placed city sources have told Car Dealer they expect a bid from American supergroup Lithia Motors to be tabled imminently.
Sources say talks are currently live between Lithia and Lookers’ shareholders about whether they would support a rival bid.
It is believed Cinch has decided to back the rival offer and it’s for this reason it has pulled its support for the current deal. Constellation Automotive Group, Cinch’s owners, declined to comment when asked why it had dropped its support.
The Canadian’s £464m current bid via Alpha Auto Group at 120p a share now looks in doubt following Cinch’s announcement this morning that it plans to now vote against the deal.
Cinch withdrew its letter of intent to bid for the deal ahead of the vote next Thursday (July 27) when shareholders will be asked to back the offer.
Lookers said it now believes it doesn’t have the required backing of 75 per cent of shareholders for it to go through, but the vote will still take place.
However, well placed city sources have told Car Dealer they expect a rival bid to be tabled soon – most likely by Lithia Motors, the acquisitive American car dealer group that last year tried to buy Pendragon.
‘The Canadian deal looks dead in the water, but the rumours are that’s because a better offer is coming,’ said a source.
‘We suspect that Cinch has seen details of another offer and that’s why they decided to pull their support for the Canadian deal.’
The Lookers share price has crashed 14 per cent so far today following the announcement by Cinch.
Schroders, which had given irrevocable undertakings that it would back the deal, has since sold all its shares it held in Lookers making its backing null and void.
Other shareholders which had originally submitted letters of intent to back the deal have also sold large portions of their shares since the original offer was announced.
As of this morning, the Bidco had intent from just 11 per cent of Lookers shareholders to back the deal. When the bid was announced this was 42.1 per cent.
Analyst for Liberum, Sanjay Vidyarthi, said the letters of intent were ‘not binding’ and explained the deal needed the backing of 75 per cent of shareholders to go through.
He said he thought the 120p offer was ‘cheap’ for Lookers and had previously suggested a target price of 150p was more sensible.
As of the end of April, Lookers had a property portfolio worth £290m and £66.5m in the bank – the equivalent of 92p per share.
Other city sources suggest an offer from the well-funded Lithia Motors could come in the region of 135p. Previously, Schroders had said in its statement that a bid of 132p could snatch the deal.
Lookers said today it was ‘re-engaging with other shareholders to understand whether the resolutions required to effect the scheme of arrangement in order to implement the acquisition are capable of being passed’.
The firm said directors believe that more than 25 per cent of shareholders now intend to vote against the deal and that means it will not be passed.
Lookers said the vote will take place next Thursday as planned and if the offer is not accepted it will remain a listed business.
‘The rumours are that another bid is coming,’ said another well-placed source.
‘The shareholders that have cashed out before that saw the 119p share price as a decent return, but Cinch obviously didn’t.
‘There are moves being made and we’re sure an announcement will be made soon.’
Lithia attempted to buy fellow listed car dealer group Pendragon last summer, but was thwarted by Hedin, the Swedish based business that later tabled – and then withdrew – its own offer.
Lithia is an NYSE-listed group and has said it wants to increase annual revenues to $50bn – last year it achieved $28bn – and it plans to do this via acquisitions.
It has already purchased the 50-site group Jardine earlier this year for £300m, making Lookers’ 150-dealership business look incredible value, even at £500m.
Industry analyst Mike Jones added: ‘I would expect other UK and international retailers, including Lithia, to be currently looking at Lookers, particularly given the willingness of the large shareholders to sell.’
Lookers said it could not comment any further than the statement issued today. Car Dealer contacted Lithia Motors for comment.
Who else could table a bid?
- Sytner-owner Penske Automotive – cash-rich and keen to grow, a combination of two of the top five most profitable car dealer groups would attract attention from the CMA. Chance of bid: 6/10
- Group 1 – the highly-profitable American based business already owns 70 dealerships here and last year made £310m profit from the UK businesses. Deal would make it the biggest group in the UK. Chance of a bid: 5/10
- AutoNation – The second largest dealer group in the States is run by CEO Mike Manley, a Brit who left Stellantis to join the firm in 2021. He knows the UK market well, but would that mean he wants a piece of the Lookers action? Chance of a bid: 6/10
- Lithia Motors – Highly acquisitive and desperate to grow, the firm tried to buy Pendragon last year, but was blocked. It recently bought Jardine for £300m. Could be put off by two large UK purchases in quick succession, but we wouldn’t rule them out. Chance of a bid: 8/10
- Hedin Group – Swedish firm offered to buy Pendragon last year, but backed out due to ‘market conditions’ in December. Trevor Finn, former Pendragon CEO, is an adviser. Just bought big in Germany, so might be distracted. Chance of a bid: 5/10
- Inchcape – the UK-based business is concentrating more these days on global distribution rather than retail, but it has the funds to do a deal. Still rather unlikely. Chance of a bid: 2/10
- AP Eagers – The Australian and New Zealand based car dealer group has a £4.6bn annual turnover. Firm believed to be interested in overseas expansion and the UK would not have language barrier issues to overcome. Chance of a bid: 4/10
- Emil Frey – one of Europe’s largest car dealer groups, but doesn’t have any holdings in the UK. Lookers would be a statement move for the business. Chance of a bid: 4/10
- Private equity – investment bankers might see Lookers as a bargain and be interested in taking it private. PE has form with TDR Capital owning Constellation Automotive Group, which owns previously listed Marshall Motor Group. Another fund could do the same. Chance of a bid: 6/10
