Listed UK dealer groups look ‘good value’ to international buyers

Listed dealers in the UK are set to become likely takeover targets following the acquisition of Jardine by Lithia Motors this week.

Head of research at Zeus Capital Mike Allen said that UK dealers group publicly listed on the Stock Exchange were looking good value for overseas companies looking to expand their business.

The Lithia Jardine deal was reported by Sky News to be worth £300m.

“Based on the historic financial information of the target, we think the acquisition highlights how undervalued the UK listed franchised dealer groups are at current levels,” said Allen.

According to latest accounts filed at Companies House for the year to 31 December 2021, Jardine generated underlying PBT of £24.5m (adjusting for £4.4m exceptional profit on asset disposals) on £1.6bn turnover.

“In our view, as we said in January, this acquisition makes the UK listed franchised dealers appear good value at current levels.

“With Sterling remaining weak relative to the US dollar, this deal could spark further international entrants and sector consolidation.

The Jardine deal is not isolated. Marshall was bought by Constellation last year. Constellation also has a small stake in Lookers.

Hedin Mobility, a major shareholder in Pendragon expressed interest in buying the group but pulled out citing economic conditions. It subsequently bought key Mercedes-Benz Retail Group dealerships.