Car dealership Lookers today moved into pole position in the race for rival Reg Vardy after having a £492M takeover recommended by its board.
Manchester-based Lookers trumped a £450m bid tabled by Pendragon as it seeks to double in size by adding the 102 sites owned by Vardy to its own network of 93 showrooms.
Lookers said the deal was compelling because it was strong in the north-west of England and Northern Ireland while its rival was focused on Scotland, the north-east and the Midlands.
The acquisition also brought Lookers together with Ford and BMW, meaning it will now represent manufacturers that cover 92% of the new car market in the UK.
Chief executive Ken Surgenor said more than a quarter of Vardy shareholders had already signalled their intention to support the deal, which will take a couple of months to complete.
In addition, Sir Peter Vardy had agreed not to vote against the takeover even though he has committed himself to supporting the Pendragon bid.
Reg Vardy was named after its founder who began a haulage business in Houghton-le-Spring, near Durham, in the 1920s and later moved into retailing cars.
Surgenor said an agreement has been struck with Sir Peter the son of the founder – to help ensure a smooth transition once the takeover goes through.
Surgenor said the deal was about “growth opportunities for the much-enlarged business, not cost savings”, although Lookers would eliminate duplicated roles.
“Our strategy has been focused on used car business, after sales service and prestige brands and the Vardy deal gives us all three in one go,” he added.
Pendragon fired the gun on the takeover race in November when it lined up Vardy as a target after the benefits of its £230m deal for CD Bramall in 2004 shielded it from a slowdown in the car industry.
This prompted Lookers to reveal that it was also considering a bid, although details of how much it was prepared to pay only emerged today.
The market liked the deal as Lookers shares rose 2% although there was disappointment among Pendragon investors as shares in the Nottingham-based dealership fell 6%.
But signs that investors believe Pendragon may return with a higher bid were evident in a rise of more than 7% in the Vardy share price to 885p – above the 875p Lookers has agreed to pay.
Commenting on the acquisition, Vardy chairman John Standen said: “We believe … that the complementary nature of the business is strong and that the enlarged group will be well-placed competitively.”
References: EGi News 17/01/06
