Pendragon has claimed that it is “well-positioned” despite the end of merger talks with fellow AM100 operator Lookers which would have created the UK’s largest car retail business.
A report by Sky News revealed that the UK’s former number one retail group by turnover had held talks with the AM100’s second-ranked group, Lookers, with regard to a potential merger over the weekend.
If successful, the talks would have resulted in a group with a turnover of almost £10 billion.
Sky alleged that Lookers had “snubbed” Pendragon, however, claiming that an insider for the group had suggested its leadership team were too heavily occupied with its COVID-19 coronavirus mitigation measures and the ongoing investigation by the Financial Conduct Authority (FCA) to advance the plan.
In a statement issued via the London Stock Exchange, Pendragon confirmed that the talks had taken place, but had now ceased.
“The Company confirms that it held outline discussions with Lookers suggesting they might explore the potential benefits of a combination of the two businesses and how this could be attractive to both sets of shareholders,” it said”
“While Pendragon believed that such an exploration would have proved beneficial, these early discussions have now ceased.”
Pendragon, now led by recently-appoint chief executive Bill Berman, revealed a £117.4 million loss after tax and laid bare the full impact of “significant H1 losses” in a 2019 annual results statement published back in March.
In its latest statement regarding talks with Lookers, however, the group insisted that it “remains well-positioned having already taken significant steps to reshape the business and to cut costs both in advance, and as a result, of the recent events which have temporarily curtailed business activity.
In its report into the merger talks, Sky News pointed out that the combination of Pendragon and Lookers would create a car retail group with annual sales of close to £10 billion, but a combined market capitalisation of little more than £200m.
In March, Lookers set out to target “improved operational execution” in 2020 following the appointment of Mark Raban as its new chief executive.
It followed November 2019 plans to close 15 dealerships and roll-out stringent cost-cutting measures in a bid to arrest failing profitability as former CEO Andy Bruce and chief operating officer Nigel McMinn both left the business.
While those plans have proceeded, on March 24 the group announced that it will expand internal fraud investigations to its entire business after initial findings from one of its operating divisions resulted in an expected one-off charge of over £4m in its 2019 financial results.