Pendragon bid too mean, says Lookers

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The Independent Online

The drive towards consolidation among the country's car dealerships crunched a gear yesterday as Lookers snubbed a £259m hostile bid from its bigger rival Pendragon.

Lookers dismissed the offer of 1.15 Pendragon shares for each of its own as too mean and suggested that such a marriage would be unlikely to find favour with some of the leading car manufacturers.

Should Lookers combine with Pendragon, which saw it off to swallow Reg Vardy only a month ago, their dealerships would be responsible for about 41 per cent of sales of new Jaguar cars in Britain and 33 per cent of all Land Rovers bought here. Such formidable distribution clout would be likely to make motor manufacturers uneasy, Lookers said.

The Manchester-based Lookers, which has more than 90 dealerships, also reckoned that the cultures of the two firms were incompatible. Power is more centralised at Pendragon, which has about 250 dealerships and is the biggest seller of Harley-Davidson motorcycles outside America, Lookers said.

Given these uncertainties, which may subsequently hurt Pendragon's share price, Lookers said it could not recommend such a deal to its own shareholders.

Pendragon disagreed and insisted that its offer - though no better than it mooted in January - was a generous one. It pointed out that the bid represented a 42 per cent premium to the price of Lookers shares on 26 January, the day Pendragon first said it was mulling an offer.

Set against their average price over the previous 12 months, the offer stands at a 95 per cent premium, Pendragon said.

Two major Lookers shareholders, Morley Fund Management and Schroders, control 12.6 per cent of the shares and are backing Pendragon's bid, which the company said was full and final.

Pendragon's strategy is to grab a bigger share of the shrinking market for new car sales in Britain, which will stand it in better stead when car sales start to perk up. Trevor Finn, Pendragon's chief executive, said: "The bid makes financial logic. It gives Pendragon a clear market-leading position and it gives Lookers' shareholders a chance to benefit from it. The maths is clear."

The offer came a day before a deadline imposed by the Takeover Panel, which polices mergers and acquisitions. Pendragon will post its offer document to Lookers' shareholders in three weeks. They have three weeks thereafter in which to respond.

Pendragon shares closed 24p lower at 606p, while Lookers rose 67p to 677p.