Dealer group Pendragon has seen its share price shoot up following the news that Lithia Motors has launched a £280m bid for the firm.
Car Dealer reported yesterday (Sep 18) that the US-based retailer had offered 16.5p per share to take Pendragon’s motors business into private hands.
Following offer being formally announced to the London Stock Exchange, the company’s share price was up by more than 25 per cent on Monday morning.
The deal, which includes nationwide dealer brands Evans Halshaw and Stratstone, is expected to be completed in the final quarter of this year if it gets the green light from shareholders.
Unlike previous takeover attempts, a simple majority of 51 per cent of shareholders is all that is required to push the deal through.
That means that major shareholder Hedin Group will not be able to block the motion, as it previously did last summer.
- Timeline: How and why previous takeover attempts at Pendragon have failed
- Analysis: Why Hedin won’t be able to block Pendragon deal this time around
Bosses at Pendragon said they had been considering potential buyers after the firm’s share price began trading lower than directors believed reflected the real value of the business.
Lithia’s offer would see Pendragon’s dealer management software business Pinewood spun out into a separate business which will retain the group’s current position on the stock market, renamed Pinewood Technologies Inc.
Shareholders are set to receive a payout of around 27.4p per share – including 16.5p from the sale and 10.9p from the continuation of Pinewood and venture into North America.
Pendragon’s shares were trading at 18.6p when markets closed on Friday.
Pendragon chief executive Bill Berman said: ‘Pendragon has built one of the UK’s leading automotive retailing businesses, underpinned by a market-leading dealer management system (DMS), the quality of our people, longstanding relationships with OEMs, and excellent execution for customers.
‘The Pendragon board considers Lithia to be perfectly placed to build on this progress.’
He added that the launch of Pinewood as a standalone company is a ‘unique and exciting opportunity’ to create a product which can be marketed globally.
Russ Mould, investment director at AJ Bell, said: ‘Rather than being swallowed up completely, Pendragon is selling its UK motor retail and leasing operation to North American player Lithia, together with offloading all debt and pension liabilities.
‘It will be left as a pureplay technology company, owning a car dealer management software platform.
‘It’s an interesting move and one that completely changes the investment case.’