Lookers' board tells shareholders to reject Pendragon offer

Lookers' board tells shareholders to reject Pendragon offer

	Published : Thu, 20 Apr 2006 08:25 By : Richard Owen Print this Story

LONDON: Car dealer Lookers Plc. has advised its shareholders to reject the 260-million-pound takeover offer from rival Pendragon Plc. saying such an acquisition would put their investments at risk.

The firm said the offer undervalued the company by more than 21 per cent and that Pendragon is "highly indebted" and had financial commitments of more than 1.4 billion pounds.

The company told the shareholders that three car makers had decided to withdraw franchises given to the company in the event of a takeover by Pendragon and now a fourth manufacturer has notified it of a similar decision. It estimated the potential loss of revenue out of this action to be around 232 million pounds annually. Volkswagen, Bentley and Vauxhall had threatened to end franchise agreements if Pendragon's hostile bid succeeded. It is now reported that Seat has joined them.

Pendragon, which had bought another rival dealer, Reg Vardy, in March feels that acquisition of Lookers will mean a three-way consolidation and the enlarged group could expect to have considerable cost savings. The firm has some 382 franchises in the U.K. and 22 overseas.

Lookers runs more than 100 dealerships.

Pendragon had earlier said its offer for the firm is full and fair, but it maintained Thursday it would respond more fully at a later date.

Lookers' advice to shareholders came as it announced its first quarter results posting a 90 per cent rise in underlying profit at 11 million pounds. Sales during the period grew 17 per cent to 385 million pounds from 330.4 million pounds a year ago. Like-for-like new car sales were up 12 per cent and used car sales up 8 per cent on the same basis.

The firm said it expects its full year 2006 adjusted profit before tax to go up 39 per cent compared to 2005 to not less than 25.1 million pounds.

Lookers' chief executive Ken Surgenor said the latest quarterly results and the expected full year profits show that Pendragon's offer is wholly inadequate.

He said the company's recent acquisitions are performing ahead of expectations and the group hopes to benefit from a full year contribution from these businesses. The company had the broadest revenue streams in the industry and it is delivering strong growth across all its diversified business streams and subsequent value to shareholders, he added.

The company issued a circular to the shareholders signed by chairman Fred Maguire outlining why they should reject the Pendragon offer. Maguire said the company's board is of the opinion that a fair exit value for the shareholders could be in excess of 920 pence-a-share. Pendragon's offer is at 722 pence-a-share.