Weak pound drives North American takeover of UK dealers

UK-based dealer groups are proving irresistible targets for overseas buyers - particularly those based in North America – tempted by both the weak pound and the quality of the businesses themselves.

On Monday, Pendragon – owner of brands such as Stratstone and Evans Halshaw - said it would sell its dealer network comprising more than 160 sites and leasing company to Oregon-based Lithia Motors for £280 million. The deal grows Lithia’s UK presence after the company agreed to buy Jardine Motors Group in March in a deal reportedly worth £300m-£400m. Jardine currently operates more than 50 dealers.

Meanwhile, Canada’s Alpha Auto Group is reportedly nearing finalisation of its deal to buy the Lookers group with 150 locations after the company upped its offer to shareholders.

Already operating in the UK is Houston-based Group 1 Automotive, which as of September last year had 79 franchises in the UK after steadily growing its presence since 2007. 

The largest of all foreign-based dealer groups currently operating in the UK is Michigan-based Penske, which runs 146 dealerships here after taking over Sytner back in 2002. Assuming the Pendragon deal goes through, Lithia would overtake Penske as the UK’s number one group in terms of outlets and run it close on revenue.

The principal foreign dealer group operating here not from North America is Sweden’s Hedin Group, which took over the Stephen James Alliance, a Mini-focused group, in August to add to its south-east-based network of Mercedes and Smart dealers. Hedin has been a long-time suitor of Pendragon’s and as its largest shareholder could yet block the Lithia deal.

The appeal of the UK’s largest dealer groups are twofold, says Steve Young, managing director of automotive sales analyst company ICDP. First is that outside groups see them as a bit of a bargain thanks to “relatively low valuations and a weak pound”, Young told Autocar. The dollar is currently trading at $1.23 to the pound, close to the level after the Brexit vote in 2016 and well down from over two dollars in 2007.