7:19 am, May 4, 2020
Pendragon has confirmed to the London Stock Exchange it held ‘outline discussions’ with Lookers over a possible merger.
In a statement released at 7am this morning, the dealer group admitted the talks took place but said they had now ceased.
Car Dealer Magazine reported at the weekend that the two firms had discussed a merger which would create the largest dealer group in the UK with a combined turnover of around £10bn.
The statement said: ‘The company confirms that it held outline discussions with Lookers suggesting they might explore the potential benefits of a combination of the two businesses and how this could be attractive to both sets of shareholders.
‘While Pendragon believed that such an exploration would have proved beneficial, these early discussions have now ceased.
‘Pendragon remains well-positioned having already taken significant steps to reshape the business and to cut costs both in advance, and as a result, of the recent events which have temporarily curtailed business activity.
‘And, as previously announced, Pendragon continues to benefit from the support of its stakeholders during the current disruption.’
Lookers is said to have rejected the approach ‘largely as a consequence of its board’s existing workload’, which includes contending with the Covid-19 crisis and an on-going FCA investigation.
Although the talks have ended, one Pendragon investor said the dealer group ‘could be interested in seeking an alternative merger elsewhere’.
Mike Allen, of analysts Zeus Capital said: ‘We note with interest that one Pendragon shareholder is supposedly seeking alternative merger partners elsewhere.
‘However, to our mind there is a lot for dealers to manage at present with Covid-19 and the timing appears strange to us. No doubt though it appears the consolidation theme could well be re-ignited over the coming months.’
David Kendrick, a partner at UHY Hacker Young, told Car Dealer Magazine that he was unsure whether a merger of such size would be allowed by the Monopolies and Mergers Commission.
He said: ‘I would have thought the two groups have their own challenges to overcome as opposed to merging and dealing with all of the integration issues.
‘I’m also not sure whether the monopolies and mergers commission would allow such a player who would command £10bn of the industry turnover!’
More: Pendragon records £117.4m loss for 2019
More: Lookers fraud investigation results in £4m charge and delayed accounts for 2019
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