Car dealership Pendragon tabled a hostile offer worth £258.8m for rival Lookers today.
The bid from Nottingham-based Pendragon comes just days after the company completed its acquisition of Reg Vardy for £506m.
Pendragon shocked the City in January by revealing it was looking at a three-way deal to buy both firms but Lookers rejected the initial offer.
Sir Nigel Rudd, chairman of Pendragon, said the company had hoped to secure the agreement of Lookers, but that it had failed to engage the board of the Manchester-based company in “meaningful discussions”.
Pendragon will now go direct to Lookers shareholders with its bid, which it described as its final offer.
Pendragon said the offer valued each Lookers share at around 725p, compared with the 509p seen prior to its interest in the company becoming known.
It had been set a deadline of tomorrow to announce its intentions towards Lookers.
Sir Nigel said: “We believe that there are significant benefits available to shareholders from our continuing consolidation in the UK motor vehicle retail sector and this offer for Lookers is consistent with Pendragon’s strategy to deliver these benefits.”
The firm said the available from a three-way consolidation of Lookers, Reg Vardy and Pendragon would be considerable and the enlarged group would benefit from cost savings.
Lookers operates a network of more than 100 dealerships in the UK with the majority based in the North West and Northern Ireland.
Pendragon has a total of 382 franchises from 323 outlets in the UK and 22 franchises from 15 outlets overseas.
Last month, Pendragon warned that the new car market faced a slowdown this year.
Highlighting the need for its acquisition spree, the company predicted there would be a 5% drop in the new car market this year – following a 13% drop in registrations in January.
Chief executive Trevor Finn described the drop-off in UK car sales as a “double edged sword” for Pendragon as although it did not help in terms of profitability it enabled large operators to consume the smaller ones.
Shares in Lookers rose 13% following today’s move – up 79.25p to 689.25p.
Finn said there were no plans to close Lookers dealerships, instead they would be merged into Pendragon’s operations and become part of its expansion.
“The industry is changing,” he said. “It’s becoming more dynamic, more IT based and technology based.”
Following a successful deal, Pendragon would hold a 6% market share, a figure which would not cause competition problems, he said.
“It is a huge industry which has historically been really fragmented,” he said. “But since the Block Exemption rules changed in 2003 the industry is catching up with others in terms of consolidation.”
Block Exemption rules define the way new vehicles are supplied throughout Europe.
Changes in 2003 meant large dealerships were able to acquire franchised dealerships without prior approval from manufacturers, provided they already owned at least one franchised dealership of a particular brand.
Lookers urged shareholders to take no action at present.
“The board is reviewing the situation and will make a further announcement in due course,” the company said in a statement.
References: EGi News 09/03/06
