Pendragon Plc (PDG.L), a British car dealers firm, and Lithia Motors, Inc. (LAD), an automotive retailer in North America, announced on Monday that they agreed to a proposed sale by Pendragon Group Holdings Limited of Pendragon NewCo 2 Limited, which holds the company’s entire UK motor business and leasing business to Lithia UK Holding Limited, a unit of Lithia Motors, for 250 million pounds.
Pendragon and Lithia Motors have also agreed the terms of a strategic partnership with Lithia, including the rollout of Pinewood, the company’s dealer management software business, to Lithia’s existing 50 UK sites and the creation of a joint venture to accelerate Pinewood’s entry into the highly attractive North American DMS market.
This is supported by a subscription by Lithia for 279,388,880 new shares in the company for an aggregate subscription price of 30 million pounds.
As part of the deal, Pendragon’s Pinewood division, which operates the company’s proprietary DMS business, will become a standalone entity, retaining Pendragon’s existing LSE listing and creating a pure play Software as a Service business with an accelerated growth plan.
Pendragon expects that the transaction will deliver a cash dividend of around 240 million pounds.
With this, the UK motor business, consisting of Evans Halshaw, Stratstone and Car Store, and Pendragon Vehicle Management, Pendragon’s leasing business, will be sold to Lithia for a cash consideration of 280 million pounds.
As part of the transaction, expected to be closed in the fourth-quarter, Pendragon shareholders will initially receive, either directly through the transaction dividend or via their retained interest in Pendragon of around 27.4 pence per share with further expected significant upside. This compares to a share price of circa 18.5 pence as of September 15.
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