Lithia & Driveway improves terms to 35.4p per Pendragon share

Lithia & Driveway has signed a revised agreement on improved terms with the Board of Directors of Pendragon to enter into a strategic partnership with Pinewood Technologies and to acquire Pendragon’s UK motor division and vehicle management division. Under the revised terms, Lithia has increased the total cash consideration versus its original offer announced on 18 September 2023 by 42%, to GBP 397 million and has increased the overall certainty of the transaction by removing certain completion conditions. The combined value of the consideration to Pendragon existing shareholders is initially equivalent to approximately 35.4 pence per share with significant upside expected from the strategic partnership and North American joint venture opportunity. The additional cash consideration is expected to increase the cash dividend payable to Pendragon’s existing shareholders 49% to 24.5 pence per share. Existing Pendragon shareholders will continue to retain approximately 83.3% ownership in Pinewood Tech and a share in a valuable joint venture to expand Pinewood’s software into the North American market. Additionally, Lithia has obtained preliminary commitments from multiple major automotive retailers to contract and roll out the Pinewood dealer management systems to their locations, representing approximately 7,500 users, contingent on the successful completion of the Lithia transaction. These preliminary commitments would only occur with Pinewood Technologies transforming, into a London Stock Exchange listed, pure-play, independent software business. The potential addition of these UK users, with Lithia’s already committed 2,500 users in the UK, represents over 30% growth from Pinewood’s current user base of approximately 31,700 as of December 2022 and nearly half of Pinewood’s FY27 target. The improved terms and preliminary commitments from Lithia demonstrate support for the transformation of Pinewood Technologies into a standalone business and unlocking significant future potential. The acquisition is planned to be financed using Lithia’s existing on-balance sheet capacity once approved by Pendragon shareholders. The revised terms of the transaction continue to represent an opportunity for Lithia to further expand and diversify its business and deliver a key strategic component to achieve its previously stated growth plans.