11:31 am, September 28, 2023
Pendragon shareholders are unlikely to approve Lithia’s buy-out offer as it significantly undervalues the dealer group.
That is according to market analysts Liberum, who say that the bid falls well below the price which could be achieved elsewhere.
The firm also believes that AutoNation will also have to up its bid to around 35p per share if it is to beat off a joint offer from Hedin and Penske.
Despite the pitfalls, experts are still expecting at least one of the deals to go through, leaving Vertu as the last major motor retailer to be publicly listed in the UK.
A spokesman for Liberum said: ‘Three approaches for Pendragon make for an intriguing situation.
‘We think that the deal with Lithia is unlikely to be approved by shareholders on 6 October, given the bids at 32p from Hedin/Penske and AutoNation.
‘We think AutoNation will need to come in at more like 35p if it wants to take Hedin out.
‘Given a 27.6 per cent stake, Hedin is in prime position to determine the fate of Pendragon. Meanwhile, the highest quality player in the sector, Vertu, looks set to be the last major motor retailer standing in the listed arena.’
The story so far:
- Lithia makes second bid for Pendragon with £280m offer
- Analysis: Why Hedin won’t be able to block Pendragon deal
- Q&A: Everything you need to know about Lithia
- Rival bid to buy Pendragon from Hedin and Sytner-owner Penske rejected
- Hedin and Penske increase their offer to buy Pendragon
- Bidding war hots up for Pendragon as THIRD suitor enters race to buy car dealer group
When Hedin and Penske first announced their joint offer last week many questioned what had led the two automotive giants to pair up.
Penske already owns Sytner and Hedin boasts and impressive and quickly growing retail portfolio of its own.
Liberum believes that Hedin has partnered with Penske in order to secure the necessary financing to complete such a major deal.
It has also dismissed fears that the Competition and Markets Authority could block the deal, due to Penske’s involvement with Sytner.
The Liberiun report added: ‘Under the terms of the agreement with Lithia, Pendragon is legally bound to hold the shareholder meeting on October 6 and shareholders representing 28.8 per cent of the share capital have irrevocably committed to the deal.
‘However, should a firm offer for the company be made which the Board has indicated that it will recommend, shareholders representing 11.5 per cent of the share capital will cease to be bound by the terms of their irrevocables.
‘Hedin and Penske technically have until October 18 to make a firm offer. It is not clear to us how the deal will be structured. We think that Hedin has partnered with Penske to secure the financing.
‘Penske would consolidate its number one position in the UK with Sytner.
‘We do not see this as bringing the total business to a level of market share that would involve the CMA, however, some OEMS (possibly BMW and Mercedes) may look at the combined business’ share of their brands and require divestments.’
AutoNation approach ‘surprising’
Experts reacted with surprise to the approach from AutoNation, which values Pendragon at the same level as Penske and Hedin.
Liberum’s analysts do not believe the bid will be accepted over the joint offer but believe improved terms could see a deal clinched.
They said: ‘On September 26, Pendragon announced that it had received an unsolicited proposal from AutoNation (where the current Pendragon CEO used to work).
‘AutoNation is the largest US motor retailer, but has no existing presence in the UK.
‘What was surprising about this approach was that it was also made at 32p/share, albeit in cash, subject to due diligence.
‘AutoNation has until 24 October to make a firm offer. If Hedin and Penske can put together the deal at 32p, we do not see why Hedin would sell to AutoNation at the same level.’
