Car dealership group rejects merger bid from rival
Altrincham car dealership group Lookers has rejected a merger approach from rival business Pendragon.
Sky News reported over the weekend that the Nottingham-based group approached Lookers a fortnight ago with a tentative merger offer.
But the North West group rejected the idea.
Sky quoted a source as saying Lookers refused to engage because it is concentrating on managing its way through the current coronavirus lockdown measures, and contending with an ongoing Financial Conduct Authority investigation.
In a stock market statement this morning, Pendragon held outline discussions with Lookers, suggesting they might explore the potential benefits of a combination of the two businesses and how this could be attractive to both sets of shareholders.
It added: “While Pendragon believed that such an exploration would have proved beneficial, these early discussions have now ceased.”
The combined annual sales value of the two groups is close to £10bn.
They would have had a combined market capitalisation of more than £200m.
Lookers managed to rebuff a hostile takeover approach by Pendragon in 2006, which valued the group, then, at nearly £260m.
However, both groups have suffered a drastic collapse in value. Lookers shares have slumped by almost 75%, and Pendragon has seen its share value retreat by almost two thirds.
In August, 2018, Lookers announced turnover for the six month period to June 30, had risen by five per cent to £2.58bn, while pre-tax profits of £45.7m were two per cent better.
Then, last March, announcing annual results to December 31, 2018, the business revealed a nine per cent decline in profits before tax of £53.1m, despite a four per cent uplift in turnover, from £4.67bn to £4.88bn.
Three months later Lookers shares fell by almost a quarter after the company announced it was to be investigated by the Financial Conduct Authority over its sales practices.
In July it announced its chief financial officer, Robin Gregson, was stepping down after 10 years in the role, and six days later it issued a profits warning.
In August it announced its half-year pre-tax profits had slumped by almost 40% to £24.9m. At the time, the group operated 165 franchised dealerships, representing 31 manufacturers, from 110 locations.
Last November the group revealed that its chief executive and chief operating officer were both stepping down with immediate effect.
And in March, this year, Lookers pulled the announcement of its annual results, saying it had identified “potentially fraudulent transactions” in one of its operating divisions.
The following day, chief operating officer, Cameron Wade, resigned from the board and left the company with immediate effect.
Its most recent trading update, on April 24, revealed a fall in sales in the two months ended February 29, even ahead of the effect of the current coronavirus pandemic lockdown.
It said it had recorded a like-for-like decline in new vehicle sales versus last year of -4.8%, while like-for-like unit sales of used vehicles declined by -2.6%.
Lookers has partly reopened 31 locations which are providing essential repairs and maintenance to key workers’ vehicles and 10 parts distribution centres.
Last November it identified 15 sites for closure as part of its ongoing portfolio review. Lookers has now sold seven sites, generating proceeds of £17.6m in 2019, and the remainder, along with other surplus freehold properties, will be sold during 2020.
It has furloughed approximately 7,000 staff. All members of the board and senior management have agreed to temporary reductions of up to 30% to their contractual remuneration.
As reported in the group’s year-end trading update, the board expects to report net debt at December 31, 2019 of around £62m, compared with £86.9m in 2018.
Lookers has declined to comment.