A potential acquisition of one of the largest car dealerships in the UK is on the brink of collapse following the announcement by a significant shareholder that it would oppose the deal.
Constellation, a major shareholder of Lookers car dealership, owning just under a fifth of the company’s shares, has publicly declared its intention to vote against the sale of Lookers to Canadian company Alpha Auto Group.
With Constellation withdrawing its support, it is now unlikely that there will be enough shareholder votes to approve the deal, as a majority of 75% is required.
Lookers’ directors have acknowledged that the takeover is highly unlikely to be approved, following engagements with investors. If the deal falls through, Lookers will continue to operate as an independent, publicly listed company. The company expressed confidence in its future prospects to generate sustainable value for all stakeholders.
The agreement reached in June set the sale price at 120p per share, valuing Lookers at £465m.
Constellation, also a car dealer, holds Lookers shares through its online used car sales brand, Cinch. No specific reason was provided for Constellation’s change of heart regarding the deal. However, support from other Lookers shareholders has been wavering.
Some shareholders who initially indicated support for the takeover have recently sold their shares, resulting in a decrease in committed support from two-fifths to 11% among Lookers’ investor base.
The car retailing market has experienced volatility in recent years, particularly due to the impact of pandemic-related lockdowns that led to a temporary halt in sales and profits as showrooms were forced to close.
However, car dealers later benefited from a surge in prices due to supply constraints resulting from factory shutdowns. This increase in selling prices contributed to higher profits across the sector.
Last year, Lookers reported pre-tax profits of £84m from revenues of £4.3bn. The company employs approximately 6,500 individuals.
Established in 1908 as a bicycle retailer before transitioning to car sales, Lookers has been listed on the London Stock Exchange since 1973.
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