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Three bidders line up for EMH acquisition

Goldman Sachs, the famously fierce US investment bank specialist in mergers and acquisitions, has flushed out prospective bidders for European Motor Holdings, the premium franchise UK car retail group.

Banking sources disclosed to the Financial Times that there were three interested parties – Inchcape, Lookers and property investor Robert Tchenguiz – with bids valuing EMH £300m-400m.

None has so far confirmed their interest, however.

UK equity analysts in the car retail sector believe that Pendragon’s recent sale and leaseback of 81 sites – raising more than £250m – means that it may be ready to make EMH its next target.

However, Pendragon would be forced to give up EMH’s six Audi, 16 VW car and two VW van franchises – brands with which it has no relationship – making it a less likely bidder.

Investors who will key to any deal include Trefick, which holds 14.2% and UBS, the largest shareholder with 14.7%. UBS also holds a 3.74% in Lookers, which fended off Pendragon’s approach earlier this year by promising shareholders it would seek significant growth through acquisition.

EMH and Lookers share a second stakeholder, Barclays plc, which holds 5.15% and 7.33% respectively.

Goldman Sachs is more used to working for companies the size of Ford, to whom it recently lent one of its best turnaround specialist, but may have been encouraged to work for EMH after the £850m turnover group appointed Roger Putnam, chairman until last year of Ford of Britain, as a non-executive director.

The decision by EMH chief executive Richard Palmer to appoint Goldman Sachs to “evaluate strategic options” effectively put a for sale sign over the company and started an auction process.

In an environment of rapid rationalization within the retail sector, EMH was never seen as a natural consolidator. It was only last year that the five-year record showed a substantial movement in turnover. That followed the £30m acquisition of SKF Holdings which brought in 18 sites mostly VW, Audi and Toyota dealers based in the north of England.

EMH’s share price had remained below £1 until the start of 2003. It hit £3 at the start of this year and shares were very heavily traded in March, April and May. At the current price of £4.79, the company is valued at more than £260m. Palmer holds 1.08% of the stock.

As well as dealerships, EMH has the UK import franchise for Perodua, the smaller Malaysian brand, and runs Wilcomatic car washers.

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