Lithia increases stake in Pinewood DMS company to more than 25%

Lithia Motors Inc. now owns more than one-quarter of the U.K.'s dealership management system provider Pinewood Technologies following purchases of nearly 5 million shares in the months since the group's initial minority investment.

"In regard to the Pinewood investment, we value the partnership with Pinewood and see opportunities to continue creating synergies across our customer ecosystem," Lithia spokesperson Jardon Jaramillo wrote in an email June 26 when asked about the purchases.

Pinewood, which had been part of the Pendragon dealership group, was spun off into its own publicly traded company owned by former Pendragon shareholders after Lithia closed on the group Jan. 31.

That £397 million ($481 million) purchase delivered Lithia both Pendragon's auto retail network and fleet management company plus a minority stake in the DMS provider. Under the acquisition terms approved by Pendragon shareholders in 2023, Lithia would receive at least 16.67 percent of Pinewood and have an option to take that share up to 19.84 percent.

Pinewood reported Feb. 5 Lithia held 19.86 percent of the company. Jaramillo said Lithia acquired the full 19.84 percent available under the deal and then bought another 0.02 percent that became available for sale.

On April 22, Pinewood shareholders approved a companywide 20 for 1 share consolidation, which would have transformed Lithia's 19.86 percent stake to 17,297,677 shares. The day after the vote, Lithia would have a $67.8 million stake in Pinewood, using historical share close data from the company and historical exchange rate data from online foreign exchange and payments company OFX.

Lithia has bought another 4,916,807 shares of Pinewood for what would be roughly $23.1 million based upon historical share closing prices and OFX exchange rate data from the acquisition dates reported. OFX exchange rate data is calculated from the purchase dates listed on Pinewood regulatory filings. This run of purchases by Lithia started with it growing its stake in the provider to 20.92 percent as of May 29, according to a Pinewood regulatory filing. The most recent transaction saw Lithia reaching 25.5 percent ownership as of June 21, according to another Pinewood filing.

Lithia has pledged to add 7,500 U.K. auto dealership users to the DMS alongside its "already committed 2,500 users" in the country. It also plans to eventually bring the DMS to the U.S.

"We are excited about the progress our Lithia U.K. platform is making with Pinewood Technologies as we continue to convert our stores there onto a single platform," Lithia CEO Bryan DeBoer said on a second-quarter earnings call. "This quarter, our investment in Pinewood ... generated a nice return, which reflects the market's positive view of the platform's possibilities."

The Pinewood stock purchases come at a time in which Lithia has been buying back its own stock. DeBoer said Lithia would buy its own shares rather than purchase other dealerships when the company is trading at a lower multiple of earnings than what other dealers are demanding to sell their stores.

During the second quarter, Lithia bought approximately 793,000 shares of itself — 2.9 percent of the stock outstanding — at a weighted average cost of $256 per share, or about $203 million. The company said it has spent $217.2 million over the past six months repurchasing its shares.