Lookers warns Pendragon deal would dent revenues

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The Independent Online

Lookers, the car dealership, stepped up its battle to fend off a hostile bid from Pendragon yesterday by claiming the deal would lead to a large dip in revenues.

According to the Manchester-based business, car manufacturers that hold franchises worth sales of £326m last year could walk away if the Pendragon offer succeeds.

It did not name the companies concerned, but analysts speculated that Volkswagen, Vauxhall and Bentley are probably the manufacturers most concerned about further consolidation among car dealers in the UK.

Lookers said in a statement: "In the event of a change of control of Lookers, the manufacturers that are represented by these franchises have the right... to terminate their agreements."

It is understood that several manufacturers have indicated in writing to Lookers that they intend to leave if Pendragon gets the backing of the City for its bid.

Pendragon is offering investors an all-share deal worth £255m. Pendragon insisted in its offer document that the deal is "low risk" with regard to manufacturer relations.

It repeated this stance yesterday, and once again attacked Lookers' management.

Pendragon asked why Lookers agreed terms that allowed "change of control provisions", which it claims are "neither necessary nor desirable".

A statement said the Pendragon deal "offers Lookers shareholders the opportunity to align their investment with a management team focused on building value for shareholders rather than one trying to assign it to vehicle manufacturers".

It previously described Lookers' business strategy as "confused and ill-conceived".

Pendragon, which has defeated Lookers once this year in the battle to buy the rival car dealer Reg Vardy, has gathered the support of some investors. Morley Fund Management and Schroders, which have 12.6 per cent of Lookers stock, are backing the Pendragon bid.

Lookers shares fell 8p to 723p, 10p above the value of Pendragon's offer yesterday. Pendragon shares closed up 1.5p at 620p.