AutoNation's (AN) Offer Heats Up Pendragon Buyout Battle
The bidding war for UK’s auto retailer Pendragon is gathering steam as U.S.-based auto retail biggie AutoNation AN jumped into the battlefield with a cash proposal of £447 million (or $544.2 million). AutoNation's offer to acquire Pendragon stands at 32 pence per share. AutoNation is a titan in retailing new and pre-owned vehicles along with associated services in the United States. The buyout will enable the firm to carve out a robust footprint in UK’s auto retail landscape.
The move has set the stage for a three-way bidding war that has captured the attention of investors and industry experts alike. The offer by AN has come hot on the heels of a sweetened joint bid from Pendragon’s leading shareholder, Hedin Mobility Group and U.S.-based retailer Penske Automotive PAG, after their prior bid of 28 pence per share was rejected by Pendragon. Their renewed bid of 32 pence per share had already stirred the buyout war.
Early last week, Pendragon struck a deal to offload its entire UK motor and vehicle management division to Lithia Motors LAD. This move is aimed at transforming Pendragon into a standalone entity, focusing on its Software as a Service (SaaS) business, Pinewood, which serves as a dealer management system.
Lithia’s deal stoked the interest of other players as well, and the scenario has now morphed into a three-pronged tussle among AutoNation, Hedin Mobility Group allied with PAG and Lithia, each vying to claim UK's third largest automotive dealership group. Pendragon’s boardis now faced with a crucial decision, as it evaluates the proposals of the contenders.
Notably, Pendragon reported robust financial performance for the first half of the year. Despite facing challenging economic conditions marked by high interest rates and cost inflation, the company witnessed 10% growth in first-half profits, totaling £36.4 million. Sales surged 13% to £2 billion. The robust demand post-pandemic has indeed acted as a tailwind, cushioning the impact of supply chain hiccups.
Moreover, the solid performance of its Pinewood software division is the driving force behind Pendragon’s decision to shift focus toward the SaaS segment. The division clocked an operating profit of £6.5 million on sales of £14.5 million.
Industry watchers are eagerly awaiting to discover, which company will eventually steer Pendragon’s wheel, guiding it toward a promising horizon.
Zacks Rank & Key Pick
AutoNation currently carries a Zacks Rank #3 (Hold). A better-ranked player in the same industry is Group 1 Automotive GPI, which currently sports a Zacks Rank #1 (Strong Buy).
Group 1’s acquisitions of dealerships and franchises to expand and optimize its portfolio are fueling growth. The company has acquired revenues of around $1 billion so far this year. GPI’s diversified product mix and omnichannel efforts bode well. The AcceleRide platform, its online retailing initiative, active at most of the firm’s U.S. dealerships, allows the company to enjoy higher productivity. Group 1’s investor-friendly moves instill optimism. In February, GPI hiked its 2023 annual dividend rate by 20%. Last month, the company boosted its buyback authorization to $250 million.
The Zacks Consensus Estimate for GPI’s 2023 sales implies growth of 8%. The consensus mark for 2023 and 2024 EPS has moved north by $2.36 and $2.14, respectively, in the past 60 days. The company surpassed earnings estimates in the last four quarters, the average being 8%.
You can see the complete list of today’s Zacks #1 Rank stocks here.
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Penske Automotive Group, Inc. (PAG) : Free Stock Analysis Report
AutoNation, Inc. (AN) : Free Stock Analysis Report
Group 1 Automotive, Inc. (GPI) : Free Stock Analysis Report
Lithia Motors, Inc. (LAD) : Free Stock Analysis Report
