17 October 2001
17 October 2001
JOINT STATEMENT FROM
PENDRAGON AND FORD MOTOR COMPANY
PROPOSED ACQUISITION BY PENDRAGON OF SHARES IN STRIPESTAR OWNED BY FORD
Pendragon and Ford announced today that they are entering into a conditional
agreement for Pendragon to acquire the shares that Ford currently owns in the
joint venture company, Stripestar. Pendragon will acquire Ford's shares,
representing 49% of the Stripestar joint venture, for a total consideration of
£5.5 million in cash. On completion, the Pendragon Group will own 100 per cent
of Stripestar and will assume the borrowings of Stripestar, which are expected
to be approximately £18 million. The transaction is conditional upon approval
by Pendragon's shareholders at an EGM to be held on 2 November 2001.
The transaction will benefit Stripestar in two main ways. A single owner will
enable a more rapid response to changes in a dynamic industry sector and will
also provide focus on business and property reconfiguration, an important
element to improve the financial return of the business.
Trevor Finn, Chief Executive of Pendragon commented:
'Since formation in 1999, Stripestar has delivered an improved service for
customers buying Ford vehicles, one of the two core objectives set out in the
joint venture agreement. However, progress on delivering improved financial
returns has been hampered by tough markets and a high overhead structure given
both the location and geographical spread of the business. Acquiring the
outstanding shares in the joint venture will help us improve these returns.
We are confident that under Pendragon's sole direction, the Stripestar
business can be restructured and its financial performance improved.'
Ian McAllister CBE, Chairman and Managing Director, Ford Motor Company Limited
'The agreement reached with Pendragon in respect of our joint venture is one
which I believe will enable the Stripestar Ford dealerships to reach their
full potential. We have seen a significant improvement in trading throughout
the Ford dealership network in 2001 compared with 2000 which has led to
improved profitability. Our agreement with Pendragon does not affect our other
retailing joint ventures in UK and Europe.'
Trevor Finn, Chief Executive Pendragon PLC 01623 725 000
David Forsyth, Finance Director
John Gardiner Ford Motor Company 01277 253 265
Rupert Younger Finsbury 020 7251 3801
BACKGROUND INFORMATION PROVIDED BY PENDRAGON PLC
PROPOSED ACQUISITION BY PENDRAGON OF SHARES IN STRIPESTAR OWNED BY FORD
Pendragon announces today that it has entered into a conditional agreement to
acquire the 49 per cent of the ordinary share capital of Stripestar Limited
which it does not currently own. Pendragon Motor Holdings, a wholly-owned
subsidiary of Pendragon will acquire the 49 per cent shareholding in
Stripestar from Ford for a consideration payable in cash on completion of £5.5
million. On completion, Pendragon will own 100 per cent of Stripestar which
will become a wholly owned subsidiary of Pendragon and will no longer be
accounted for as a joint venture. Accordingly, Pendragon will assume the
borrowings of Stripestar which are expected to be approximately £18.0 million
In view of the size of the acquisition, it is conditional, inter alia, on
shareholders' approval. As Ford is a substantial shareholder in Stripestar,
the acquisition is also a related party transaction under the Listing Rules of
the UK Listing Authority. An extraordinary general meeting is to be held at 10
am on 2 November 2001 for the purpose of approving the acquisition.
Information on Pendragon
Pendragon is one of the largest UK motor car retailers, operating from 111
dealership locations. Pendragon, excluding the Stripestar Ford franchises, has
the following motor car franchises: Aston Martin, BMW, Ferrari, General
Motors, Jaguar, Jeep, Land Rover, Maserati, Mercedes Benz, Mini, Porsche,
Rover and Volvo together with franchises for Japanese and American motor
In addition to the retailing of new and used motor vehicles, Pendragon
provides aftersales services and vehicle contract hire. Pendragon also sells
software products to the motor trade mainly through its Pinewood subsidiary.
Pendragon primarily operates in the UK but also has motor car retailing
businesses in Germany and the USA.
Information on Stripestar
The principal business of Stripestar is the retailing of new and used Ford
motor vehicles and the provision of aftersales services. Stripestar currently
operates eight customer market areas in the UK through 28 separate
Stripestar was established by Pendragon to hold its Ford dealerships. The
joint venture with Ford was formed in September 1999 when Ford subscribed for
49 per cent of the ordinary shares in Stripestar, leaving Pendragon with 51
per cent of Stripestar. Pendragon retained the freehold and long leasehold
properties occupied by the Ford dealerships.
The recent trading record of the Pendragon Ford dealerships (from January 1998
to September 1999) and Stripestar (from September 1999 to December 2000) is
Years ended 31 December
1998 1999 2000
£000 £000 £000
Turnover 428,939 443,637 409,789
Operating profit/(loss) 3,262 (884) (6,582)
Profit/(loss) before taxation 2,468 (2,303) (8,422)
The major proportion of the losses before taxation in the year ended 31
December 2000 were incurred in the second half of the year. The interim
results for the 6 months ended 30 June 2001, announced on 23 August 2001,
showed Pendragon's share of the loss before tax of Stripestar in that period
of £0.6 million (2000: loss of £0.7 million). The losses before tax in the
second half of 2001, up to the end of September, have continued at a similar
rate to those in the first six months of 2001. Following completion, Pendragon
expects to be able to benefit from the unutilised tax losses of Stripestar.
As at 31 December 2000, the book value of the net assets of Stripestar was £
15.1 million (including goodwill) and Pendragon's share of these net assets
was £7.7 million as at that date. Total borrowings of Stripestar were £18.9
million as at 31 December 2000.
Background to and reasons for the acquisition
The Stripestar joint venture was formed to establish and develop model Ford
dealerships. The primary objectives of the joint venture were firstly, to
improve the customer's experience of acquiring Ford vehicles and services by
implementing the latest methods in customer handling, offering potential
customers the benefit of skilled staff, quality premises and efficient
processes and secondly, to improve the financial return to both Pendragon and
Ford. It was envisaged at the time of the creation of Stripestar that these
key objectives should be achieved within a five year period.
Good progress has been made on the first of these objectives. Certain of the
back office activities which include telephone call handling, finance and
insurance sales, warranty and accounting services have been centralised at
Pendragon's customer services centre at Loxley House in Nottingham. This has
led to improvements in the customer satisfaction levels recorded at the
dealerships through more efficient customer handling and improved ability at
the centre to monitor dealership performance. Improvements in the area of
customer satisfaction are expected to continue.
Progress on the second objective, to improve the financial return, has been
slow. Whilst Stripestar management has been taking action to reduce the cost
base of the business, for example by closing a number of underperforming or
surplus to requirement satellite sites, the closure costs of which have been
expensed, the overall financial performance has suffered due to the disruption
caused by well publicised issues surrounding new car pricing in the UK, such
as the delay in publication of the results of the Competition Commission
investigation into new car pricing in the UK.
In addition, Pendragon believes that further restructuring of the dealerships
is required before the business can return to profitability. Also important is
the ability to manage the property issues which arise as a result of the
restructuring. A number of key properties occupied by Stripestar are owned by
Pendragon and leased to Stripestar. Pendragon's acquisition of Ford's shares
in Stripestar will enable the restructuring to be progressed under a single
ownership structure. This should lead to more rapid progress on this important
aspect of returning the business to profitability.
The directors of Pendragon are confident that under Pendragon's sole
direction, the Stripestar business can be restructured and the financial
performance of Stripestar can be improved with benefits starting to have an
impact in 2002.
A circular is expected to be posted to shareholders later today.