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Pendragon’s solution: Buy Reg Vardy and Lookers

In a remarkable development, Pendragon has made an offer to buy Lookers and Reg Vardy.

Pendragon has kept its previous offer of 800p per share for Reg Vardy, while it will also offer a share exchange for the entire share capital of Lookers.

The Lookers’ board was approached on two separate occasions by Pendragon, the first on December 21, when Pendragon made its initial offer. This offer was rejected by the Lookers board as it ‘very substantially undervalued the company’. The second approach was made on January 12. Pendragon revised its initial offer, which amounted to 1.15 new Pendragon shares for each Lookers share. This was also rejected by the Lookers board on January 16. Lookers then stated it was ‘not prepared to enter discussions relating to the revised offer’.

Pendragon said it will now approach Lookers' shareholders directly.

“Lookers shareholders would benefit from the proven track record of the Pendragon management of integrating large acquisitions,” said Pendragon in a statement. The dealer group also said it was confident it has the management experience necessary to integrate the businesses of both Reg Vardy and Lookers simultaneously and successfully.

“Such a combination would also allow Lookers’ shareholders to exchange their existing holdings for shares in an enlarged group which would be both well-capitalised and the clear industry leader.”

However, Pendragon’s success still relies on the failure of Lookers’ own proposed acquisition of Reg Vardy for 875p per share. But even if Lookers are successful with their bid, Pendragon can still issue a ‘call option’ which will allow it to acquire Sir Peter Vardy’s 16.6% stake of Reg Vardy.

Pendragon intends, prior to the Reg Vardy shareholder meetings, to exercise its rights under the ‘call option’ and vote against the acquisition of Reg Vardy by Lookers.

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