A privately owned Canadian car dealer group, Alpha Auto Group (AAG), has reached an agreement to purchase Lookers, a renowned UK auto retail group, in a deal valued at more than £465.4m. AAG, based in Toronto, offered 120p per share, representing a substantial premium compared to Lookers' closing share price of 88.7p. The acquisition is expected to be finalised in the later part of Q3 or early Q4 this year. To facilitate the purchase, AAG will utilise a bidding vehicle called Global Auto Holdings Limited, enabling them to make their entry into the UK market. Lookers has officially approved the all-cash offer and has recommended it to its shareholders.

Constellation Automotive Group, the owner of Cinch, had previously acquired a 20% share in Lookers by purchasing shares owned by Tony Bramall in an £80m deal. As part of the agreement with AAG, Constellation Automotive Group will sell its holding. AAG has secured irrevocable undertakings from 42.1% of Lookers' shareholders, surpassing the 30% requirement to make an offer for the entire company. With this level of support, including from directors, it is highly likely that the deal will proceed as planned.

The directors of Lookers acknowledge the inherent cyclicality in the auto retailing market and the ongoing transformation towards electric vehicles, alongside other factors such as inflation, macro-economic uncertainty, overseas supply chain development, and changes to the distribution model. They believe that the offer from AAG provides Lookers' shareholders with an attractive opportunity to accelerate and de-risk their investment while realising an immediate cash exit at a significant premium to the prevailing share price.

In 2022, Lookers reported increased revenue of £4.3bn and pre-tax profits of £82.7m. The company has a robust balance sheet with net cash of £66.5m and a property portfolio worth £290.5m. Lookers operates over 150 dealerships across the UK.

David Kendrick, CEO of UHY Hacker Young, a deal-making accountancy firm, expressed no surprise at the acquisition, highlighting the undervaluing of UK businesses. Kendrick also emphasized the attractive value of Lookers, even at 120p per share, and the potential for a new entrant to bring exciting changes to the market. He noted that the UK market has seen a surge in interested parties looking to enter due to strong profitability and relatively low multiples compared to international markets.

The original article can be read at cardealermagazine.co.uk.