Lookers gatecrashes Reg Vardy bid talks

Lookers, the car dealership business, revealed yesterday it is in talks with lenders to buy a rival operator, Reg Vardy, raising the prospect of a takeover battle.

A statement from Lookers said the company had been in negotiations with the board of Reg Vardy, the UK's second-largest car dealer, about a possible cash offer and has made "good progress" arranging finance to fund the acquisition.

Shareholders in Reg Vardy had earlier in the day been asked by the board to accept an increased offer from Pendragon, Britain's largest car retailer, of £450m in cash. Pendragon is borrowing £700m from a group of banks led by Royal Bank of Scotland to help finance the 800p-a-share transaction. The only seller of Cadillacs in the UKincreased its offer to 800p a share from 750p a share over the weekend. However, investors pushed Vardy shares up 10p to 804p yesterday after Lookers held out hope of a higher offer.

"Lookers is continuing to progress discussions with potential funding providers," the company said. "It believes that there would be no regulatory issues in relation to any offer it might make."

Pendragon said it has irrevocable undertakings from Reg Vardy directors and their families to acquire about 27.2 per cent of the total share capital. Sir Peter Vardy, the chief executive, has granted Pendragon an option to buy his 16.6 per cent of the company at 800p a share, or about £74.8m. The Sunderland-based Reg Vardy will have to pay Pendragon about £5m in a break fee if it pulls out of the deal.

A combined Reg Vardy and Pendragon creates a business with about 325 dealerships. Lookers operates about 50 outlets across the country.