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Stock market: The shortage of easy prey

The Lookers share price says it all. The company is now widely viewed as a bid target. It follows that if you come up front in a takeover battle, you acknowledge the virtue of consolidation.

It would be hard for Lookers now to say that combination with another major player of similar size or larger would be a bad thing.

Bidding for Reg Vardy against the ultimately successful Pendragon was an acknowledgement that sitting Lookers in the same group as Vardy would be good. Lookers share price was 450p when Pendragon made its surprise move at Christmas. It changed little while the Lookers board was debating whether or not to challenge Pendragon. When the rival bid came the share price whistled up to £6 and now sits at £5.75.

Lookers was always playing catch-up after Pendragon had taken the initiative. It was never likely to be in with a shout after Sir Peter Vardy had pledged his shares and the shares he controlled to Trevor Finn’s cause.

So why did Lookers show up at all? “We had absolutely no idea that Sir Peter was a potential seller,” said Lookers finance director David Dyson. “Once we knew it would have been wrong for us to ignore the opportunities. It would have been letting down the shareholders.”

So does he acknowledge that he is at risk of a bid himself? “Are we vulnerable? Well, as a public company, we are always open to bids,” he says.

In effect, Pendragon has taken out a competitor in the race to grow by acquisition. It is the second time he has done that having also swept up CD Bramall in 2004. There is an argument that Finn has also neutralized Lookers as an acquisition competitor. The Manchester group would not like to come second to Pendragon a second time. It wouldn’t look good and every full scale bid carries cost approaching £2m – a nasty charge to have to set against the year’s profits. The problem is the shortage of easy prey.

European Motor Holdings continues to crop up in gossip. So, too, does Arnold Clark – the biggest non-listed company in the sector. Clark’s largest competitor in Scotland and the north was Vardy, so acquisition of the privateer would give a very powerful position to Pendragon north of the border.

Sir Arnold, though, has declared himself over and over again to be disinterested in the cash. He is 78 years old yet the passion for doing deals appears to glow brightly still. On the other hand, Sir Peter Vardy was never a seller until the day that he did.

Finally, what do the stockbroker analysts think? Oliver Wynn-James at Panmure Gordon said: “Lookers will sulk for a bit and then get on with its expansion. Pendragon will bid for it at Christmas.”

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