18 September 2023

US group Lithia has agreed to buy Pendragon’s UK auto retail and leasing operations, including the Evans Halshaw and Stratstone divisions, for £280 million. Under the agreement, the Pendragon PLC business will continue as a listed company, but operating only its Pinewood software business.

It will be renamed Pinewood Technologies.

Lithia Motors will pay £250m for Pendragon plus £30m as an investment in the remaining PLC software business.

Pendragon shareholders will receive a 16.5 pence per share payment at the completion of the transaction. Lithia will assume all existing Pendragon net bank debt and pension oblications, leaving the continuing group free of debt. For the deal to go ahead, 51% of shareholders need to vote in favour. Lithia said it already had the support of more than 26% of shareholders.

Lithia has also promised to adopt Pinewood’s dealer management system for its entire UK operation, including the 50 dealerships it owns through Jardine Motors. This deal, which completed in March 2023, was understood to be worth £300m and allowed Jardine Matheson to “focus on its strategy of generating long-term value in its core growth markets in Asia”.

Jardine operates 42 new car network points and posted 2021 pre-tax profit of almost £29m.

Commenting on the acquisition, Bryan DeBoer, Lithia & Driveway president and CEO, said: “The strategic partnership with Pinewood Technologies and acquisition of Pendragon’s UK motor and vehicle management divisions is a massive step in delivering on our longer-term growth strategy. We are excited about the great potential in Pinewood’s offering and envision our strategic partnership to further expand this SaaS business globally.

“Additionally, the proposed acquisition presents a highly synergistic growth opportunity with our existing UK presence with Jardine Motors Group; provides a new adjacency with PVM; and expands our brand and geographic footprint while serving to further strengthen our existing OEM relationships. This transformative transaction provides key strategic components for LAD to achieve its previously stated goal of $2 of EPS for every $1bn in revenue in the future.”

Bill Berman, chief cxecutive of Pendragon (pictured), added: “Pendragon has built one of the UK’s leading automotive retailing businesses, underpinned by a market-leading dealer management system, the quality of our people, long-standing relationships with OEMs and excellent execution for customers. The Pendragon Board considers Lithia to be perfectly placed to build on this progress.

“The launch of Pinewood as a standalone company is a unique and exciting opportunity to create a best-in-class product for customers, which we can market globally and drive substantial value for our shareholders, and in Lithia, we have the perfect partner to help accelerate Pinewood’s push into the hugely attractive North American DMS market.”

Pendragon’s software business Pinewood was in the news back in July, when High Court hearings began for the legal challenge by Pendragon Technologies Asia Pacific Ltd, a Hong Kong-based software reseller. A judgement remains pending.

The new bid for Pendragon is Lithia’s second attempt to buy the firm after a takeover bid last year was blocked by Pendragon’s largest shareholder Hedin.

Tags: Evans Halshaw, Jardine Motors, Lithia, Pendragon, Pinewood, Pinewood Technologies, SaaS, Stratstone