American automotive powerhouse, Lithia Motors, has made a second bid for UK-listed dealer group, Pendragon, in a proposed deal worth £280m. The sale will include Pendragon’s car dealership businesses, while its dealer management software business, Pinewood, will be spun out into a separate entity called Pinewood Technologies Inc.
Lithia’s offer encompasses £30m for shares in the spun-off Pinewood business and values the motors business at 16.5p per share. Shareholders will retain an 83.3% stake in the software business. As part of the deal, Lithia will assume all of Pendragon’s net bank debt and pension obligations.
Following the completion of the sale, Pendragon intends to return £240m to its shareholders. However, the deal is contingent on shareholder approval. Schroder Investment Management Limited, Briarwood Capital Partners LP, and other major shareholders, representing at least 26.5% of Pendragon’s shares, have expressed their support for the agreement. It remains to be seen whether Hedin, the group’s largest shareholder, will endorse the deal.
Lithia’s bid for Pendragon comes after speculation that the company was considering an acquisition of another UK dealership, Lookers. The acquisition of Pendragon’s assets will strengthen Lithia’s presence in the UK market. Pendragon CEO, Bill Berman, believes Lithia is well-positioned to build upon the progress made by Pendragon and is excited about the prospects of Pinewood as a standalone company.
Under the proposed agreement, Lithia will also establish a joint venture with Pinewood Technologies Inc to enter the North American market. Both companies will invest £10m each to facilitate the launch, targeting an EBITDA profit of approximately £27m by 2027.
Bryan DeBoer, Lithia’s CEO, expressed enthusiasm about the partnership with Pinewood Technologies and acquisition of Pendragon’s UK motor and vehicle management divisions. He sees this as a significant step in delivering on their long-term growth strategy, expanding their global SaaS business, and strengthening their relationships with OEMs. Pendragon’s non-executive chairman, Ian Filby, believes the deal maximizes value for stakeholders and offers ongoing ownership in an exciting technology company.