Canadian auto group swoops for Lookers with £465m deal

Altrincham car dealership group, Lookers, has agreed a £465.4m takeover bid by Toronto-based Alpha Auto Group, a privately owned Canadian car dealer network through a special bidco.

The all-cash offer is worth 120p-a-share, a substantial premium to the group’s closing price on Monday of 88.7p.

Alpha Auto Group was founded in 2014 and operates seven sites in the US, as well as 10 in its home market. It is linked to key manufacturers such as Audi, Ford, BMW, Toyota and Mercedes.

The Lookers board, which will remain in situ, is recommending that shareholders accept the Alpha Auto offer.

Paul Van der Burgh, interim chairman of Lookers, said: “The significant financial and operational progress made by Lookers in recent years demonstrates Lookers’ ability to deliver excellent and sustainable value for our stakeholders.

“After a period of extensive engagement between the parties, the offer represents an attractive opportunity for our shareholders to realise cash now for their investment at a significant premium to the prevailing share price.

“We have spent considerable time reviewing the potential impact of Bidco’s ownership on Lookers’ wider stakeholders and are confident that the commitments given by them will protect stakeholder interests. Bidco has clearly outlined its commitment to continue supporting our customers, operations, communities, and, most importantly, our talented and committed people.”

Mark Raban, Lookers’ chief executive, said “Today’s offer reflects the transformational progress that has been made in recent years. We have harnessed our strong market position, enhanced our brand relationships, and executed well against our six strategic priorities.

“I am excited about the combination with Bidco. It will create a business of greater scale, and bring together two successful businesses with complementary OEM (original equipment manufacturer) relationships, and a strong platform to support future growth in the UK.”

Kuldeep Billan, director of Bidco and founder and executive chairman of AAG, said: “The proposed acquisition of Lookers represents a compelling opportunity to acquire one of the leading UK auto retail groups while partnering with fantastic OEM brands and Lookers’ approximately 6,500 strong team members.

“We look forward to further building upon Lookers’ strong OEM relationships by being a trusted and reliable retail partner while delivering strong volumes and a high level of customer experience across a range of OEM ‘go to market’ strategies.”

He added: “With the UK auto retail market undergoing substantial change, including the adoption of new distribution models, we believe that the wider group is well positioned to navigate the current environment with geographically diversified operations and a focus on operational excellence.

“The wider group will benefit from the continuity of Lookers’ executive team, our shared values and an unwavering commitment to operating with the highest levels of integrity for the benefit of all stakeholders. We are deeply committed to the UK and look forward to further establishing our presence in the market over the long term.”

Lookers, which was founded in Manchester in 1908 and now operates from around 150 dealerships, has recovered strongly from an accounting crisis, and the impact of the pandemic on the car industry.

Three years ago Lookers was forced to suspend trading in its shares, following an investigation into its accounts, and eventually revealed a £45.5m loss for 2019.

Then, after the sector ground to a halt during the pandemic, it fought off a hostile bid from Pendragon.

In April this year Lookers published annual figures that showed top line revenue grew to £4,300.9m from 2021’s £4,050.7m, was despite a 5.8% overall reduction in new and used vehicle volumes sold.

Revenue growth was down to a higher average selling price of cars by 12.9%, the supply to the new retail sales channel being prioritised by manufacturers in 2022 and Lookers increasing its used vehicle finance operation.

Profit before tax decreased to £84.4m (2021: £90.0m, including £9.8m of COVID support), which the board claims are “extremely strong comparatives from our record performance in 2021.”

The group holds property assets with a net book value of approximately £290.5m and net funds of £66.5m, representing 92p per share as at 31 December 2022.

Lookers is also expanding in the Electric Vehicle market.

Russ Mould, investment director at Manchester investment platform, AJ Bell, said: “Lookers received a takeover offer, continuing a trend that has seen the UK-listed car retail sector shrink in recent years including successful bids for Marshall Motors and Cambria Automobiles as well as a failed one for Pendragon.

“Scale matters in this industry and operators are always looking for a way to plant more flags, be it locally or internationally.

“Investors will be looking closely at Motorpoint in this regard as its shares last night hit a new all-time low of 102.75p, having lost 73% of its value since September 2021, thanks to a pullback in car prices, with the pains of higher interest rate costs and the cost-of-living pressures hurting demand for vehicles.

“Might it be the next company in the sector vulnerable to a bid?”