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Pendragon in talks to buy Reg Vardy

The UK’s largest dealer group, Pendragon plc, has made an approach to buy its third placed rival Reg Vardy plc.

An announcement by Reg Vardy’s board to the stock exchange this afternoon confirmed that it has received an unsolicited approach from Pendragon. The Sunderland-based group’s share price has risen more than 20% since the beginning of November, peaking at today’s 725p per share – a 52-week high.

The announcement says that the discussions “may or may not lead to a cash offer” for the whole of the issued share capital of Reg Vardy, valued at 750 pence per share.

Vardy’s statement continues: “Discussions between the parties are taking place but there can be no certainty that an offer will be forthcoming or the other terms of any offer, if made. The board will make a further announcement in due course.”

Pendragon could finance the takeover through a sale and leaseback of the properties with Royal Bank of Scotland, the joint venture partner in Pendragon’s property subsidiary PPHO Ltd.

Alternatively, it may apply to the stock-market for a rights issue.

Acquisition of £1.8bn turnover Reg Vardy would push Pendragon’s annual sales, currently £3.4bn, up to £5.2bn from almost 350 dealerships. This would leave the Nottingham-based company way ahead of second placed AM100 group Arnold Clark, whose sales total £1.8bn.

One city analyst told AM he thinks Pendragon’s offer is “a very good price” and will be attractive to Vardy shareholders.

“I don’t think we’ll see anything happen this side of Christmas, but if this goes ahead it will give Pendragon a 5-8% market share in the UK, which still means there’s a lot of scope for more consolidation,” he added.

“I don’t think anybody had considered the possibility of consolidation between two big players. The big question this would raise is how the other leading groups will respond.”

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