Lithia Motors Speeds Into The UK: The $350M Deal That's Poised To Make Billions!

Lithia Motors Inc LAD said it intends to enter a strategic partnership with Pinewood Technologies and acquire the U.K. motor and fleet management divisions of Pendragon plc.

The cash consideration for the strategic partnership with Pinewood Technologies and acquisition of the U.K. motor and fleet management divisions of Pendragon is approximately $350 million.

The company expects the acquisition to round out its presence in the U.K. market and generate over $4.5 billion in annual revenues.

As part of the agreement, the ongoing Pendragon business, comprising the Pinewood DMS platform, will remain listed on the London Stock Exchange under the name Pinewood Technologies plc.

The agreement will help Lithia's U.K. operations grow their digital capabilities by adopting the Pinewood technology platform.

Also, Lithia and Pinewood, through a joint venture, will co-develop automotive technology solutions to capitalize on the North American market opportunity.

Lithia will take a 16.7% ownership in the remaining Pinewood business at completion of the transaction.

The acquisition of Pendragon Vehicle Management (PVM) is expected to add a profitable fleet management services business to Lithia and initiate the foundation for global growth in this adjacency.

"Additionally, the proposed acquisition presents a highly synergistic growth opportunity with our existing UK presence with Jardine Motors Group; provides a new adjacency with PVM; and expands our brand and geographic footprint while serving to further strengthen our existing OEM relationships. This transformative transaction provides key strategic components for LAD to achieve its previously stated goal of $2.00 of EPS for every $1 Billion in revenue in the future," said President and CEO Bryan DeBoer.

Post-completion, Lithia would have estimated annualized revenues of over $38 billion.

Lithia plans to finance the deal using existing on-balance sheet capacity. It held $199.7 million in cash and equivalents as of June 30, 2023.

Price Action: LAD shares closed lower by 3.70% at $294.02 on Friday.