Increased Terms for Proposed Lithia Offer
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
FOR IMMEDIATE RELEASE
2 October 2023
Pendragon PLC ("Pendragon" or the "Company")
Increased Terms for the Proposed Disposal of UK Motor and PVM and Strategic Partnership with Lithia
Equivalent to 35.4 Pence per Ordinary Share with Significant Further Upside
· Total cash consideration of £397 million, an increase of £117 million, or 42%
· Expected cash dividend to Pendragon shareholders of 24.5 pence per share, an increase of 49%
· Implied total initial value to Pendragon shareholders of approximately 35.4 pence per share
· Transaction structure provides substantial upside for Pendragon shareholders through enhanced growth prospects for Pinewood as a standalone, pure-play SaaS business and through the Strategic Partnership
· Certain closing conditions related to OEM consents and CMA approval waived by Lithia
· Revised terms significantly increase the value and certainty delivered to Pendragon shareholders
· Irrevocable support for the transaction from Pendragon shareholders and Directors representing approximately 28.0% of shares
· The Pendragon Board recommends the transaction as value maximising for Pendragon shareholders
The Boards of Directors of Pendragon and Lithia Motors, Inc. are pleased to announce they have agreed to improved terms for their previously announced transaction. On 18 September 2023, the Boards of Directors of Pendragon and of Lithia Motors, Inc. announced (the "Announcement") that they had agreed the terms of a proposed sale by Pendragon Group Holdings Limited of the entire issued share capital of Pendragon NewCo 2 Limited which will hold, either directly or indirectly through its wholly-owned subsidiaries, the Company's entire UK motor business and leasing business (the "Disposal"), to Lithia UK Holding Limited ("Lithia"), a wholly-owned subsidiary of Lithia Motors, Inc. for a gross aggregate consideration of £250 million (subject to certain financial adjustments) (the "Consideration").
Pendragon and Lithia Motors, Inc. also announced that they had agreed the terms of a strategic partnership with Lithia, including the rollout of Pinewood, the Company's dealer management software ("DMS") 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, underpinned by a subscription by Lithia for 279,388,880 new Ordinary Shares in the Company (the "Subscription Shares") for an aggregate subscription price of £30 million (the "Subscription Price") (the "Strategic Partnership" and, together with the Disposal, the "Transaction").
The circular in respect of the Transaction, including the Notice of General Meeting in respect of the General Meeting to be held at 10 a.m. on 6 October 2023 (the "Original General Meeting"), was published and made available to Shareholders on 20 September 2023 (the "Circular").
Terms not otherwise defined in this announcement shall have the meaning given to them in the Announcement.
Increased Terms
The Boards of Directors of Pendragon and of Lithia Motors, Inc. have agreed the terms of an increase in cash consideration for the Disposal to £367 million (subject to certain financial adjustments) (the "Revised Consideration"), representing a £117 million improvement to the Consideration. In addition, the CMA Condition and the OEM Condition have been removed as closing conditions to the Disposal (together with the Revised Consideration, the "Transaction Amendments" or the "Revised Transaction"). All other terms and conditions of the Transaction, including the expected timing of the Transaction Completion, remain unchanged from those previously publicly disclosed.
As a result, the total cash consideration is £397 million (subject to adjustments), including the previously publicly disclosed subscription for shares in Pendragon at the Subscription Price.
In summary, the Revised Transaction provides Shareholders with a total value per Ordinary Share comprising:
(i) expected 24.5 pence in cash, to be received by way of a dividend to be paid following Transaction Completion (the "Transaction Dividend");
(ii) a retained c.83.3 per cent. ownership in the continuing Pendragon business (including Pinewood) (the "Continuing Group"), valued initially at c.10.3 pence per Ordinary Share on a fully-diluted basis; and
(iii) an indirect interest in the North American joint venture valued initially at c.0.6 pence per Ordinary Share.
Accordingly, in aggregate, Shareholders will initially receive (either directly through the Transaction Dividend (save for Lithia who will not participate in the Transaction Dividend in respect of the Subscription Shares) or via their retained interest in Pendragon) the equivalent of approximately 35.4 pence per Ordinary Share with further significant upside expected from the Strategic Partnership.
General Meeting
On 20 September 2023, the Company announced that it had received a non-binding indication of interest from a consortium of Hedin Mobility Group AB (publ) and PAG International Ltd. (the "Consortium"), which was rejected by the Board of Directors of Pendragon. This announcement however put the Company into an "offer period" under the UK City Code on Takeovers and Mergers (the "Code"). On 22 September 2023, the Company announced that it had received a further non-binding indication of interest from the Consortium and that the Pendragon Board was considering and would consult with Pendragon shareholders. On 26 September 2023, the Company separately announced that it had received a non-binding indication of interest from AutoNation, Inc. and that the Pendragon Board was also considering and would consult with Pendragon shareholders.
Given the impact of the Transaction Amendments on the ability of a potential offeror to make an offer for the Company, the Transaction Amendments would constitute "frustrating action" under Rule 21 of the Code. Therefore, in addition to the relevant approvals required under the Listing Rules in respect of the Transaction (as set out in the Circular) (the "Listing Rules Resolution"), it is a requirement of Rule 21.1 of the Code that the Transaction Amendments be conditional upon the approval of Shareholders and therefore an additional resolution is required to seek the approval of Shareholders for the purposes of Rule 21.1 of the Code (the "Rule 21.1 Resolution" and together with the Listing Rules Resolution, the "Resolutions").
Accordingly, the Board of Directors of Pendragon now announces that the Original General Meeting will be opened and adjourned immediately and Shareholders are asked not to attend the Original General Meeting. Instead, a supplementary circular is expected to be sent to Shareholders shortly, containing further details of the Transaction Amendments, the Resolutions, the Board's recommendation and a notice of general meeting in respect of a further General Meeting (the "Further General Meeting") at which Shareholders will be asked to approve the Resolutions (the "Supplementary Circular").
The Board of Directors of Pendragon continues to consider the Revised Transaction to be in the best interests of the Shareholders as a whole and recommends that Shareholders vote in favour of the Resolutions.
The Directors who hold interests in Ordinary Shares (other than Martin Casha who, as previously announced, will be stepping down as a Director on 7 October 2023) have each irrevocably undertaken to vote at the Further General Meeting in favour of the Resolutions in respect of the Ordinary Shares to which they are beneficially entitled (representing in aggregate approximately 0.2 per cent. of the entire issued share capital of the Company as at 29 September 2023, being the Latest Practicable Date).
In addition, Shareholders who hold interests in Ordinary Shares representing, in aggregate, approximately 27.8 per cent. of the entire issued share capital of the Company as at the Latest Practicable Date have each irrevocably undertaken to vote at the Further General Meeting in favour of the Resolutions in respect of the Ordinary Shares to which they are beneficially entitled. The Shareholders comprise Schroder Investment Management Limited, Briarwood Capital Partners LP, Hosking Partners LLP, Farringdon Netherlands BV, Huntington Management LLC, Harwood Capital Management (Gibraltar) Limited, and Sir Nigel Rudd.
Transaction Timetable
In accordance with the Listing Rules, due to the size of the Revised Transaction in relation to the size of the Company, the Revised Transaction constitutes a Class 1 transaction (as defined in the Listing Rules) and completion is therefore conditional upon, amongst other things, the approval of Shareholders of the Listing Rules Resolution at the Further General Meeting. In addition, the approval of Shareholders of the Listing Rules Resolution at the Further General Meeting is required under Listing Rule 9.5.10R to authorise the issue of the Subscription Shares at a price per Subscription Share which exceeds a discount of 10 per cent. of middle market price of the Ordinary Shares at 15 September 2023. Accordingly, the Supplementary Circular is expected to be sent to Shareholders shortly, containing further details of the Transaction Amendments, the Board's recommendation and a notice of general meeting in respect of the Further General Meeting at which Shareholders will be asked to approve the Resolutions. Subject to satisfaction of the conditions to the Revised Transaction, completion is expected to occur in Q4 2023.
Enquiries:
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Jefferies International Limited (Sponsor, Financial Adviser and Joint Corporate Broker) |
+44 (0) 20 7029 8000 |
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Philip Noblet |
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Thomas Bective |
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Jordan Cameron |
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Berenberg (Joint Corporate Broker) |
+ 44 (0) 20 3207 7800 |
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Ben Wright |
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Headland Consultancy (PR & Communications) |
+44 (0) 20 3805 4822 |
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Henry Wallers |
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Jack Gault |
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CMS Cameron McKenna Nabarro Olswang LLP is acting as legal adviser to Pendragon.
Important Notices
Cautionary statement
This announcement is not intended to, and does not constitute, or form part of, any offer to sell or an invitation to purchase or subscribe for any securities or a solicitation of any vote or approval in any jurisdiction. Shareholders are advised to read carefully the formal documentation in relation to the Revised Transaction once it has been despatched. Any response to the Revised Transaction should be made only on the basis of the information in the formal documentation to follow.
This announcement has been prepared for the purpose of complying with the applicable law and regulation of the United Kingdom and information disclosed may not be the same as that which would have been disclosed if this announcement has been prepared in accordance with the laws and regulations of jurisdictions outside the United Kingdom.
Important information relating to financial adviser
Jefferies International Limited ("Jefferies"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting solely for the Company, and for no-one else, as financial adviser in connection with the Transaction and the Revised Transaction and as sponsor in connection with the Disposal and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice to any other person in relation to the Disposal, the Transaction and the Revised Transaction, the content of this announcement or any other matters described in this announcement. To the fullest extent permitted by law, neither Jefferies nor any of its affiliates assumes any responsibility whatsoever for or makes any representation or warranty express or implied, in relation to the contents of this announcement, including its accuracy, completeness or verification or for any other statement made or purported to be made by it, or on its behalf and nothing contained in this announcement is, or shall be, relied upon as a promise or representation in this respect whether as to the past, present or future, in connection with the Company, the Group, the Disposal Group, the Continuing Group, the Transaction or the Revised Transaction. Jefferies and its affiliates accordingly disclaims to the fullest extent permitted by law all and any duty, responsibility and liability whether arising in tort, contract or otherwise which it might otherwise be found to have in respect of this announcement or any such statement or otherwise.
Inside information
This announcement contains inside information. The person responsible for arranging this announcement on behalf of Pendragon is Richard Maloney, Group General Counsel and Group Company Secretary.
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