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City tips EMH as Inchcape acquisition

Unexpected swings in the share price of European Motor Holdings (EMH) have triggered rumours among analysts and speculators of another major motor dealer takeover bid in the wake of Pendragon's recent landmark purchase of CD Bramall.

This time rumours suggest Inchcape may be interested in EMH – although it would be buying at a time of inflated stock value. EMH shares stood at just above 100p last spring – whereas last week they reached 203p.

“It's a good time to sell,” says Alan Pulham, director of the Retail Motor Industry Feder-ation's franchised dealer division. “The CD Bramall deal was driven by the seller – because it saw the market as peaking. It may be that EMH is going in the same direction.”

But Pulham points out that Inchcape's stated strategy is to make selective acquisitions over time, rather than landing a couple of major dealer group targets.

EMH has been under scrutiny for some time as a potentially attractive target for ambitious motor retailers. At the start of 2004, the influential MSN Money website named EMH as one of six shares to watch this year.

“European Motor is well placed to be a bid target. With an established range of dealerships in the north of the UK, it would fit well with a larger group like Inchcape,” it reported.

EMH also has the UK import concession for Perodua cars – a business that might be attractive to Inchcape.The dealer group's share price rose 9.5p to 205p, before falling back to 203p on Monday. The speculation suggested Inchcape would be making a £124m bid for EMH.

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