That is the deadline by which Lookers shareholders have to decide whether they want to be riding Britain’s thoroughbred consolidator or whether the outsider will do.
By April 6, Pendragon has to publish its Offer Document, under Stock Exchange rules. It is not expected to do so before March 30. Shareholders have to reply within three weeks.
Trevor Finn, the head lad in the Pendragon stable, has already been able to declare that two of the biggest institutional shareholders in Lookers are Trojan horses.
Schroder Investment and Morley Fund Management have both said that the Pendragon bid is good enough and they are up for it. But then they have long been Finn admirers and have probably been waiting for this moment for some time. Together they hold 12.6% of Lookers.
There are two other tactics in the Pendragon offer. One is that it is an all-share offer (1.15 Pendragon shares – currently £6.37 – for every Lookers share), which means that Lookers shareholders just accept the offer and remain invested in the sector to accrue the next round of consolidation benefits. The offer values Lookers – with net asset value of £86m - at £259m.
The other trick is that this is a Final Offer. In other words, Pendragon is not going to get involved in an auction on price. Lookers shareholders, therefore, cannot prance around wondering about tactical betting. They cast their bets for the champion, or stick with the runner with less form.
Some say that Pendragon is bidding low because it does not really want another acquisition to bed down simultaneous with Reg Vardy. The Pendragon men say fiddlesticks.
When they dealt with CD Bramall two years ago, that was a similar size to themselves. Lookers and Vardy together are only a similar size to today’s Pendragon. And during the period that has elapsed, much time and money has been lavished on the electronic platform that supports the group accounts.
In one way, a Lookers acquisition would actually be tastier than was Vardy and the clue to it is in the profit forecast in the initial bid announcement. It says: “The acquisition will become enhancing to earnings… during the first 12 months of ownership.”
Pendragon is keeping the Vardy headquarters building and many of its staff. Because of that, the Lookers overhead is not required.
There is every reason for the Lookers management to fight like mad to defeat the bid.
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