AutoNation won't make formal Pendragon offer

Lithia Motors, which revealed plans for a Pendragon acquisition in mid-September, has now seen two rival auto retailers drop out of the running to acquire the U.K. company.

October 17, 2023 02:27 PM

AutoNation Inc. will not make a formal offer for the United Kingdom's Pendragon, the U.S. auto retailer giant said Tuesday — a move that puts Lithia Motors Inc. in the driver's seat to acquire the coveted publicly traded company.

In late September, Pendragon said it received an unsolicited proposal from AutoNation to acquire the company. Reuters valued the offer at $544 million. At the time, AutoNation said there could be no certainty as to whether it would make a binding offer. Pendragon, which said it was considering that proposal, said AutoNation had until Oct. 24 to announce a "firm intention" to make an offer.

"These assets presented AutoNation with a potential opportunity to expand into a new market," AutoNation CEO Mike Manley said in a statement. "However, after further considering the opportunity, we decided not to make a formal offer.

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"AutoNation will continue to leverage [mergers and acquisitions], which may include opportunities within and outside the U.S., to expand our business portfolio in a meaningful and synergistic way, and to create value for our shareholders."

AutoNation's unsolicited proposal followed two joint proposals from Penske Automotive Group Inc. along with Sweden's Hedin Mobility Group. Penske and Hedin this month said they do not intend to make an offer to buy Pendragon.

AutoNation and Penske Automotive abandoning their Pendragon pursuits follows Lithia's decision this month to increase its offer to acquire the dealership and fleet businesses of Pendragon for $482 million, up from an initial offer of $350 million.

As part of Lithia's deal, Pendragon's dealership management system Pinewood is to be transformed into a standalone company, Pinewood Technologies. Lithia would gain about a one-sixth ownership stake in that entity. Lithia and Pinewood plan to form a joint venture to bring a DMS to North America. Lithia first revealed its Pendragon deal on Sept. 18.

Pendragon shareholders are set to vote on Lithia's deal Oct. 25.

AutoNation, of Fort Lauderdale, Fla., ranks No. 2 on Automotive News' list of the top 150 dealership groups based in the U.S., with retail sales of 229,971 new vehicles in 2022. Lithia is No. 1 on the list and Penske is No. 3.