Remember that this latest battle was sparked by Lookers in its abortive bid for Reg Vardy. Lookers has ‘unanimously rejected’ Pendragon’s offer, which is a share offer not a cash bid but nonetheless is at around 725p a share, rather more than the 300p level the company was trading at last year. What is more, Pendragon has already bagged 12% of the Lookers’ shareholders with its opening offer and it may not take much of an improved offer to push enough shareholders into selling. In the end a public company is always on the block to be sold for the benefit of its shareholders.
Meanwhile, all this blood in the water is doing no harm for the shares of other dealers like European Motor Holdings and Caffyns. Despite the latter going through trying times with its now defunct Rover business, its value has risen over a third since the autumn. Likewise William Jacks has popped 50% since the late autumn. Even Inchcape, which is highly valued by comparison and hardly a simple motor dealer, seems to be benefiting from all the kafuffle. It’s only the suffering HR Owen that hasn’t felt the benefit.
Once animal spirits are unleashed in the market and investors are banking their first round of profits there’s little respite before another big rally. Things only begin to settle down after someone gets to hold the baby on some kind of overzealous speculation.
The motor dealer sector is far from this position so the fun is likely to run for quite a while yet. Motor dealers are still pretty much at the back of the pack when it comes to certain financial metrics. This is because profits can often be seen to be eked out rather than easily run, in a business where the dealers are seen as rather powerless in front of the customer and the supplier.
But this perception seems to be making way to the idea that the business has huge turnover and potential for rationalisation, which would turn the sector into a cash cow.
(Prices correct at time of going to press).