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Lookers' directors say 'our results prove we are right'

Lookers has gone on the offensive against rival Pendragon’s aggressive takeover plans, citing its latest financial results as a reason to remain independent.

Lookers’ unaudited first quarter results, released today, shows that adjusted profit before tax for the first three months of the current year was up 90% to £11.0m (Q1 2005: £5.8m).

Turnover increased by 17% to £385m (Q1 2005: £330.4m).

A 2006 profit forecast for Lookers, he says, reinforces the continuing strong growth prospects of the company. Lookers’ board is forecasting an adjusted profit before tax of "not less than £25.1m".

Ken Surgenor, chief executive of Lookers, said: "Lookers has the broadest revenue streams in the industry and is arguably better equipped than any of its peers to thrive in the current retail environment. This performance unambiguously demonstrates the effectiveness of our strategy in delivering strong growth across all our diversified business streams and subsequent value to shareholders."

In a circular to shareholders Lookers’ chairman Fred Maguire says: "Because Pendragon is offering you its shares as consideration for your shares in Lookers, your board has considered carefully the prospects for earnings growth in both Pendragon and Lookers. It has concluded on the basis of historical, current and prospective trading results that Lookers offers materially better prospects for earnings growth than Pendragon. Accordingly, the board has concluded that Pendragon’s offer should be rejected on the basis of the two companies’ relative growth prospects.

"The Lookers’ board believes that a fair exit value for Lookers is in excess of 920p per share in cash. Pendragon’s offer of 722p in shares is a discount of more than 21% to this level. The board has therefore concluded that Pendragon’s offer should be rejected because it fundamentally undervalues Lookers."

Lookers says it has identified three key areas of risk that should be considered when assessing Pendragon’s offer:

  • Pendragon is a highly indebted company. Lookers’ board estimates Pendragon’s financial commitments to be more than £1.4 billion

  • Four manufacturers have already notified Lookers that they will withdraw franchises in the event of a takeover by Pendragon resulting in £232 million of lost revenues

  • Pendragon acknowledges the risks of failure to integrate the Lookers group. Lookers believes there are particular risks in relation to Lookers’ Northern Irish activities (2005 revenues: £349 million) and to FPS, Lookers’ non-franchised parts distribution business (2005 revenues: £76 million).

    "Your directors will not be accepting Pendragon’s offer in respect of their own beneficial shareholdings. You are strongly advised not to sign any document which Pendragon or its advisers send to you," Maguire concludes.

    Pendragon made a formal offer for rival dealer group Lookers on April 6.

    In a statement posted directly to Lookers’ shareholders, Pendragon put forward its offer of 1.15 Pendragon shares for every Lookers share they hold. This values Lookers at £259 million.

    Pendragon wants all acceptances of its offer before April 27.

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