US car dealer AutoNation sets up bidding war for Pendragon

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US car retailer AutoNation has offered to buy Pendragon, setting up a three-way bidding war for one of the UK’s largest car dealerships.

Based in Fort Lauderdale, Florida, AutoNation’s bid values Pendragon at £447mn. Pendragon said it was “carefully considering” the proposal, which was pitched at 32p a share.

Shares in Pendragon jumped 10 per cent to 32.9p in early trading on Wednesday.

The battle for the UK’s last remaining major listed car dealer pits the largest US dealership owner against Pendragon’s former CEO and Sweden’s Hedin Mobility. A third bid from US group Lithia proposes to break up Pendragon.

The UK car dealer last week agreed to sell its dealerships to Lithia for £280mn to focus on its software arm. The proposal was backed by the board and 29 per cent of shareholders.

Two days later Hedin Mobility and PAG International offered to buy the whole company for 28p a share. Last week the pair increased their offer to 32p, although their offer still requires debt financing.

Pendragon’s former chief executive Trevor Finn, who ran the UK group for two decades before being ousted over governance concerns, is a director at Hedin, which has thwarted previous takeover offers.

The number of listed UK dealerships has been whittled down to just two, Pendragon and the much smaller Caffyns, as the industry has consolidated.

Pendragon also said on Wednesday that its first-half profits rose 10 per cent to £36.4mn as sales climbed 13 per cent to £2bn. The increase in profits came despite “challenging economic conditions, with pressure from higher interest rates and ongoing elevated levels of cost inflation”.

Car sales have proved resilient because of strong demand after pandemic-driven disruption led to a shortage of parts and helped push up prices. The average profit it made per car was £2,779, about 8 per cent higher than the same period a year earlier.

Its Pinewood software division, which would remain the rump of the company if the proposal from Lithia goes through, made an operating profit of £6.5mn on sales of £14.5mn. The division sells its software to dealerships across the US.