Lithia Motors has agreed to buy Pendragon’s car dealerships and leasing business in a deal worth more than £250m.
The deal – subject to shareholder approval and announced to markets yesterday – will see Lithia become one of the largest car dealership groups in the UK.
The American giant has made no secret of its desire to grow in the UK through acquisitions, but what do we know about this firm? Here we take a closer look at the firm.
To give the firm its proper name, Lithia & Driveway is a New York Stock Exchange-listed (NYSE:LAD) car business with seemingly world domination plans. It has been very open about its goal to nearly double its annual revenues to between $55bn and $60bn by 2025 and it wants to do this through acquisitions. It currently runs dealers in American, Canada and now, following deals this year, in the UK.
Lithia now operates 291 dealerships in the United States, around 40 in the UK (Jardine & Arden BMW) and 14 in Canada. It will add a further 160 dealerships with its purchase of Pendragon if it all goes through as planned. In the States it is proud to boast that 95 per cent of the population is within a 250 mile radius of one of its sites.
The group sold 271,596 new cars in 2022 making it the biggest selling car dealer group in America. Quarterly it clocks up around 68,000 new cars sales – and this was before it snapped up its UK sites.
In 2022, Lithia Motors clocked up $28bn (£22.6bn) with profits of $1.25bn (£1bn). That’s quite some war chest for its shopping spree… The company is listed at number 145 in the Fortune 500.
Lithia also operates the Driveway Finance Corporation, its own finance house that offers funding for consumers and dealers. Started in 2012, the firm was originally called Southern Cascades Finance Corporation. In 2022, the finance arm had a portfolio worth $2bn.
Lithia has a variety of American business names selling its cars including Airstream Adventures, Baierl, Carbone Auto Group, DCH Auto Group, DTLA Auto Group, Keyes, PFAFF, Prestige, Priority Automotive, Sterling Motorcare, Suburban and Wilde Automotive Group. In the UK, it hasn’t changed the Jardine name while its likely Pendragon’s Stratstone, Evans Halshaw and Carstore names will continue too.
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Lithia is run by chief executive officer Bryan DeBoer who was previously the company’s senior vice president of mergers & acquisitions and then its chief operating officer. He joined the firm in 1989 and worked in car dealerships in a variety of sales and finance roles. He has run the company since 2012.
In March this year, Lithia snapped up Jardine Motors for a staggering £300m. The dealership group represents a variety of luxury brands – including Aston Martin, Ferrari, Maserati, McLaren and Porsche. In 2022, Jardine made profit before tax of £31m from annual revenues of £1.63bn. Last year, Jardine was the 10th most profitable group in the Car Dealer Top 100 list of most profitable dealers.
In a relatively complex deal, Lithia is set to acquire Pendragon’s car dealerships and leasing business for £250m. It is also investing £30m in Pinewood, the software business, which will retain Pendragon’s place on the London Stock Exchange and be renamed Pinewood Technologies. The deal is subject to shareholder approval, but only needs 51 per cent of them to agree for it to pass. The firm says it already has backing from a quarter of shareholders.
The deal is worth the equivalent of 27.4p per share, a substantial premium on the 18p per share price on Friday. Shareholders will get a dividend of 16.5p next year as a result of the asset sale and will retain an 83.3 per cent shareholding in Pinewood, which will remain on the Stock Market. Lithia and Pendragon have invested £10m each in the tech business and plan to drive growth via a launch in the States.
Pretty big indeed. If the deal to buy Pendragon’s dealership assets goes through, it will make it the second largest car dealer group in the UK based on annual revenues with £5bn of turnover to its name, behind Sytner in first with £5.7bn. The Car Dealer Top 100 ranks dealer groups in profit which would put the combined group in third place – combining Jardine and Pendragon’s 2021 EBITDA profit would make £231m, behind Arnold Clark in first (£398m) and Sytner (£246m).
The combination of Jardine and Pendragon will see Lithia represent a staggering 25 brands in the UK. These include:
- Aston Martin
- Audi
- BMW
- BYD
- Citroen
- Dacia
- DS
- Ferrari
- Ford
- Genesis
- Hyundai
- Ineos
- Jaguar Land Rover
- Kia
- Maserati
- McLaren
- Mercedes
- Mini
- Nissan
- Peugeot
- Pininfarina
- Porsche
- Renault
- Smart
- Vauxhall
It’s highly likely that with such a firm foothold in the UK, Lithia will look to add other businesses to its portfolio. In the States, it’s number one and with that title in the UK only just out of reach, it wouldn’t take much to push it into the number one spot. Expect more deals like the Arden BMW one announced two weeks ago which saw the American firm buy the small business based in Maidstone and Tunbridge Wells.
Jardine’s former CEO Neil Williamson has been appointed UK regional president and is currently running the UK operations. Pendragon’s CEO Bill Berman is staying with Pinewood along with the firm’s CFO. Lithia said Williamson will run the larger group in the UK.
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