European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>Lookers disclosed that Cinch (largest shareholder with 19.52% stake) plans to vote against the scheme. The shares have dropped to halfway between the pre-offer price and Alpha Auto's offer.</li>
<li>The shares are pricing a 45% probability of deal completion. This sector has a track record of failed deals, so it is understandable that investors are spooked.</li>
<li>Top Lookers shareholders are keen on selling and an offer from Lithia could well happen. At around 103p I'd be long, as I consider the risk reward is balanced. </li>
</ul>


Lookers disclosed that Cinch (largest shareholder with 19.52% stake) plans to vote against the scheme. The shares have dropped to halfway between the pre-offer price and Alpha Auto's offer.
The shares are pricing a 45% probability of deal completion. This sector has a track record of failed deals, so it is understandable that investors are spooked.
Top Lookers shareholders are keen on selling and an offer from Lithia could well happen. At around 103p I'd be long, as I consider the risk reward is balanced. 


Alpha Auto Group/​Lookers: From Done Deal to Uncertain Situation

Index Rebal/Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal/Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Index Rebalance

<ul>
<li>In this insight, we take a look at the potential index changes for F100 and F250 in the run up to the September 2023 Rebalance.</li>
<li>I currently expect two changes for the F100 index and three changes for the F250 index.</li>
<li>As always, there are several names lurking just outside the borders and could be involved in index changes in September 2023 if there are sharp price changes.</li>
</ul>


In this insight, we take a look at the potential index changes for F100 and F250 in the run up to the September 2023 Rebalance.
I currently expect two changes for the F100 index and three changes for the F250 index.
As always, there are several names lurking just outside the borders and could be involved in index changes in September 2023 if there are sharp price changes.


Quiddity Leaderboard F100/​​250 Sep 23: Two F100 Change and Three F250 Changes Likely

<ul>
<li>Long expected consolidation is arriving to UK car retailers. Alpha Auto agreed to acquire  <a href="https://www.smartkarma.com/entities/lookers-plc" target="_blank" data-smartkarma-citation="entities:22031:1" rel="noopener">Lookers PLC (LOOK LN)</a> via scheme at 120p/share, c.£465.4 million, 35.3% premium, 8.4x Fwd P/E.</li>
<li>The sector appears materially undervalued, with Lookers before announcement on 6.2x Fwd P/E, 4% FY23e yield (4x cover). My fair value estimate is 143p/share (multiples and DCF), 19% above offer price. </li>
<li>Spread 1.17%/4.32% (gross/annualised, assuming settlement around 1 October). Top shareholders have only signed letters of intent (40% aggregate). I'd be long in case of sweetening. VTU LN could be next.</li>
</ul>


Long expected consolidation is arriving to UK car retailers. Alpha Auto agreed to acquire  Lookers PLC (LOOK LN) via scheme at 120p/share, c.£465.4 million, 35.3% premium, 8.4x Fwd P/E.
The sector appears materially undervalued, with Lookers before announcement on 6.2x Fwd P/E, 4% FY23e yield (4x cover). My fair value estimate is 143p/share (multiples and DCF), 19% above offer price. 
Spread 1.17%/4.32% (gross/annualised, assuming settlement around 1 October). Top shareholders have only signed letters of intent (40% aggregate). I'd be long in case of sweetening. VTU LN could be next.


Alpha Auto Group/Lookers: Consolidation at a Cheap Offer Price

<ul>
<li>On 20 November, the Daily Telegraph reported that Pendragon intends to back Hedin's 29p approach (4.2x EV/Fwd EBITDA). On 21 November, the Panel granted a PUSU extension till 9 December.</li>
<li>My fair value estimate is 39p (WACC 9%, 2.4% perpetual growth), 34% above the prospective bid, and 5.0x EV/Fwd EBITDA and 11.8x Fwd P/E (vs. Inchcape's 6.0x and 11.8x respectively).</li>
<li>The shares are trading at 2.4% gross spread to the prospective offer. Risk/reward seems favorable as I believe there is the possibility of a higher offer. Long.
</li>
</ul>


On 20 November, the Daily Telegraph reported that Pendragon intends to back Hedin's 29p approach (4.2x EV/Fwd EBITDA). On 21 November, the Panel granted a PUSU extension till 9 December.
My fair value estimate is 39p (WACC 9%, 2.4% perpetual growth), 34% above the prospective bid, and 5.0x EV/Fwd EBITDA and 11.8x Fwd P/E (vs. Inchcape's 6.0x and 11.8x respectively).
The shares are trading at 2.4% gross spread to the prospective offer. Risk/reward seems favorable as I believe there is the possibility of a higher offer. Long.



Hedin Group/​Pendragon: Closer To Clinch a Deal

Leading International Investment Research, Edison Investment Research

Edison Investment Research

Leading International Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisors and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting.

Equity Bottom-Up

Edison Investment Research is terminating coverage on SandpiperCl (SANDPI), Mirriad Advertising (MIRI), Trackwise Designs (TWD), Lookers (LOOK) and BerGenBio (BGBIO). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant.

Edison Investment Research is terminating coverage on SandpiperCl (SANDPI), Mirriad Advertising (MIRI), Trackwise Designs (TWD), Lookers (LOOK) and BerGenBio (BGBIO). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant.

United Kingdom

Lookers is an automotive retail and distribution company operating a network of car, van, and motorcycle dealerships across the UK and Ireland. It specializes in the sale of new and used vehicles, along with providing servicing, maintenance, parts, and accessories for over 30 automotive brands. The company was founded in Manchester, UK, in 1908 and is now headquartered in Altrincham, UK.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Lookers (LOOK LN)

Alpha Auto Group/Lookers: From Done Deal to Uncertain Situation

A puzzling situation: on the one hand, Cinch (19.5%) believes the offer undervalues Lookers, while another large shareholder, J O Hambro has...

Jesus Rodriguez Aguilar

Quiddity Leaderboard F100/250 Sep 23: Two F100 Change and Three F250 Changes Likely

Newly-listed cross-border payment services provider Cab Payments Holdings Plc (CABP LN) could be added to the F250 index in September 2023 unless...

Janaghan Jeyakumar, CFA

Alpha Auto Group/Lookers: Consolidation at a Cheap Offer Price

The car retail business in the UK is extremely fragmented, with minimal entry barriers, resulting in strong rivalry and poor profitability. Lookers...

Jesus Rodriguez Aguilar

Hedin Group/Pendragon: Closer To Clinch a Deal

On 20 November, the Daily Telegraph reported that Pendragon intends to back Hedin's 29p approach (4.2x EV/Fwd EBITDA). On 21 November, the Panel...

Jesus Rodriguez Aguilar

Lookers - Termination of coverage

Edison Investment Research is terminating coverage on SandpiperCl (SANDPI), Mirriad Advertising (MIRI), Trackwise Designs (TWD), Lookers (LOOK) and...

Edison Investment Research

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Alpha Auto Group/​Lookers: From Done Deal to Uncertain Situation

A puzzling situation: on the one hand, Cinch (19.5%) believes the offer undervalues Lookers, while another large shareholder, J O Hambro has...

Jesus Rodriguez Aguilar

Quiddity Leaderboard F100/​​250 Sep 23: Two F100 Change and Three F250 Changes Likely

Newly-listed cross-border payment services provider Cab Payments Holdings Plc (CABP LN) could be added to the F250 index in September 2023 unless...

Janaghan Jeyakumar, CFA

Alpha Auto Group/Lookers: Consolidation at a Cheap Offer Price

The car retail business in the UK is extremely fragmented, with minimal entry barriers, resulting in strong rivalry and poor profitability. Lookers...

Jesus Rodriguez Aguilar

Hedin Group/​Pendragon: Closer To Clinch a Deal

On 20 November, the Daily Telegraph reported that Pendragon intends to back Hedin's 29p approach (4.2x EV/Fwd EBITDA). On 21 November, the Panel...

Jesus Rodriguez Aguilar

Lookers - Termination of coverage

Edison Investment Research is terminating coverage on SandpiperCl (SANDPI), Mirriad Advertising (MIRI), Trackwise Designs (TWD), Lookers (LOOK) and...

Edison Investment Research

Alpha Auto Group/Lookers: From Done Deal to Uncertain Situation

Quiddity Leaderboard F100/250 Sep 23: Two F100 Change and Three F250 Changes Likely

Hedin Group/Pendragon: Closer To Clinch a Deal