21st Apr 2006 07:01
Pendragon PLC21 April 2006 Not for release, publication or distribution, in whole or part, in, into or from the United States, Canada, Australia or Japan. FOR IMMEDIATE RELEASE 21 April 2006 FINAL OFFER by CITIGROUP GLOBAL MARKETS LIMITED ("citigroup") on behalf of Pendragon plc ("Pendragon") for LOOKERS PLC ("LOOKERS") POSTING OF CIRCULAR TO LOOKERS SHAREHOLDERS Pendragon announces that it will today be posting a circular to LookersShareholders (the "Pendragon Circular") which contains a letter from Sir NigelRudd, the Chairman of Pendragon, as well as a summary of the reasons whyPendragon believes that its offer for Lookers represents a compellingopportunity for Lookers Shareholders. An extract from the Pendragon Circular is included below: "Dear Sir or Madam On 6 April 2006, the Board of Pendragon posted a document to the shareholders ofLookers which detailed the reasons why it believes Pendragon's Offer for Lookersis a full and fair one and why the Pendragon Board believes it is in yourinterests to accept Pendragon's Offer. Since then, the Lookers Board has postedits defence document which I believe contains a number of optimistic andunsubstantiated claims. • We believe that the three-way combination of Pendragon, Reg Vardy andLookers will create substantial value for all shareholders. The Lookers Board'sdefence document merely seeks to divert the attention of Lookers Shareholdersaway from the merits of what we believe to be an extremely compelling Offer. As a consequence of Pendragon's current scale, we see scope for considerable andcontinuing synergies through the removal of significant parts of Lookers'central and regional management and leveraging the infrastructure of thecombined Pendragon/Reg Vardy Group. We also believe that additional cost savingscan be generated through reductions in overheads at the Lookers dealership levelas we move from their out-dated decentralised structure to our centralisedapproach. Lookers Shareholders will benefit from these synergies as well as fromour recent acquisition of Reg Vardy. • Lookers Shareholders should seriously question the achievability of theprofit forecast that Lookers has now produced which predicts adjusted earningsper share growth nearly five times that of the consensus analyst forecast for2006. You have been asked to accept the Lookers profit forecast as an act of faith asthe Lookers Board has provided no clear explanation as to how it expects thisforecast to be achieved. You should ask whether the Lookers Board is takingshort-term actions to meet this forecast at the risk of the group's long-termprospects. Lookers Shareholders are unlikely to be able to verify this forecastuntil this time next year - by which time it may be too late for shareholders tohold the Lookers Board accountable for advising them to give up an opportunityto be part of the industry's leading consolidator and to share in the benefitsof the three-way combination of Pendragon, Reg Vardy and Lookers. • The Lookers Board has made numerous comments about the risk ofmanufacturers terminating their arrangements with Pendragon. We believe this issimply scaremongering on their part. In our evaluation of every potential transaction, we explicitly consider whethercertain parts of the acquired businesses may be discontinued. Our evaluationrelates not only to dealerships where we currently do not operate the franchise,but also to other dealerships and operations that we do not see as being part ofthe core business for other reasons. In most cases, we look to eitherrefranchise the dealership under one of our 33 existing brands or sell thedealership and reinvest the proceeds into our business. We gave carefulconsideration to this Offer for Lookers, including the matters raised by theLookers Board regarding franchises being at risk, and concluded that thetransaction would become enhancing to earnings (before exceptionals) during thefirst twelve months of ownership after taking into account expected synergies1. 1 This statement should not be interpreted to mean that the earnings pershare of the Enlarged Pendragon Group will necessarily be greater than or equalto those in prior years. • The Pendragon management team has completed and integrated severallarge acquisitions and therefore understands the processes and work involved. Since Pendragon first expressed an interest in acquiring Lookers, the LookersBoard has claimed that the integration of Lookers would lead to increased riskfor Lookers Shareholders. The Lookers Board has never implemented an integrationof this size; they have never negotiated with manufacturers following anacquisition on this scale; they have never geared up their balance sheet to makea major acquisition of this size and then managed the debt down; and they havenever created shareholder value by being able to participate in such a largescale acquisition. We have, and we have done all of these things well. • The Offer is full and fair. Pendragon's Offer represents a significant and immediate premium to Lookers'historical share price. It also compares favourably with the price paid on otherrecent deals. As the deadline for acceptances approaches, I believe that the response to ourproposals from the Lookers Board has focused on trying to convince LookersShareholders of the risks of the Pendragon Offer - risks that we have a proventrack record of managing effectively. We encourage Lookers Shareholders to participate in a great growth strategywhich I feel certain will continue to deliver superior returns to investors.Accept the Pendragon Offer now. Yours faithfully Sir Nigel Rudd Chairman THE PENDRAGON OFFER IS A FULL AND FAIR ONE 1. The Offer Value Represents A Significant And Immediate Premium The Offer values each Lookers Share at approximately 717 pence. This is asubstantial premium to any recent Lookers Share price prior to Pendragon'sannouncement of a potential Offer for Lookers. • 93 per cent. to the average Closing Price of 370.7 pence per Lookers Share for the twelve months prior to 26 January 20062 • 41 per cent. to the Closing Price of 509.0 pence per Lookers Share on 26 January 2006 • 73 per cent. to the Closing Price of 415.5 pence per Lookers Share on 15 November 20053 On any of these measures, the Pendragon Offer represents a significant premiumto Lookers' historical share price and Lookers Shareholders have thisopportunity to capture that premium now by accepting this Offer. 2 The day prior to Pendragon's announcement of a possible Offer for Lookers 3 The day prior to Reg Vardy announcing that it was in talks with Pendragonregarding a possible Offer 2. The Offer Price Represented A Higher Exit Multiple Than Pendragon's PastDeals Pendragon's Offer represents an extremely attractive multiple of adjusted 2005earnings (which, unlike Lookers' forecast, is a certain figure) and isconsistent with the multiple we paid in our recent acquisition of Reg Vardy. TheReg Vardy price was established in open competition with Lookers and representeda full and fair value for Reg Vardy shareholders. Offer Price / EarningsPendragon / Lookers (as at 4 April 20064) 19.2xPendragon / Reg Vardy 19.1xPendragon / CD Bramall 11.3x I believe this Offer compares very favourably with other recent deals andrepresents full and fair value to Lookers Shareholders. 4 The latest practicable date prior to the publication of the OfferDocument 3. The Offer Price Represents A Higher Exit Multiple Than Lookers Offered ToPay For Reg Vardy The exit multiple that Pendragon is offering for your shares is higher than themultiple that your Board was willing or able to pay only three months ago intheir failed bid for Reg Vardy. In comparative terms, Reg Vardy was a much lowergeared business than Lookers and therefore, arguably, should command a highervaluation than Lookers. Pendragon is able to pay this value for Lookers because of its ability toextract synergies from the integration of Lookers' dealerships into its existinginfrastructure. We believe that the transaction will become enhancing toearnings (before exceptionals) during the first twelve months of ownership aftertaking into account expected synergies.5 5 This statement should not be interpreted to mean that the earnings pershare of the Enlarged Pendragon Group will necessarily be greater than or equalto those in prior years. 4. No One Else Is Offering A Higher Price For Lookers In a sector which is undergoing consolidation, no other bidders have emergedsince Pendragon announced it was considering an offer for Lookers nearly threemonths ago. The fact that no other offers have emerged reinforces our belief that thePendragon Offer is a full and fair one. 5. The Lookers Profit Forecast Is Risky The profit forecast of 49 pence per Lookers Share has been made only threemonths into the current financial year. This forecast predicts year-on-yearearnings per share growth nearly five times that of the consensus analyst 2006estimate for Lookers. The Lookers Board have given no indication of how theyintend to meet this forecast. Lookers Shareholders may wonder what short termactions its management team may need to take to meet this forecast and whatimpact these will have on the group's long term prospects. Lookers Shareholders should ask themselves whether this earnings forecast isactually achievable and what the impact would be on the Lookers Share price ofnot meeting this forecast. THE PENDRAGON OFFER IS LOW RISK TO LOOKERS SHAREHOLDERS 1. Actions By Manufacturers Cannot Impact The Value Of The Business Within the European Union, the rules that govern the franchising relationshipbetween retailers like us and motor vehicle manufacturers were fundamentallychanged in 2003 in a way which strengthened the retailers' position. Amongstother things, we now have the unrestricted right to buy franchises if we alreadyhave a franchise of that particular brand. The rules also protect us fromdiscrimination at the hands of manufacturers, whether in relation to the supplyof new cars or any other aspect of the retailer/manufacturer relationship. Thismeans that, in addition to the good working relationships we have with ourmanufacturer partners, our franchises are safeguarded by the European Unionrules relating to our industry. As I have previously stated, we have considered whether certain of the Lookersdealerships are likely to be discontinued. In the event that some are, we havethe option of refranchising the dealership under another of our 33 existingbrands or sell the dealership and reinvest the proceeds into our business. On numerous occasions, the Lookers Board has tried to raise concerns about theactions that manufacturers may take following a successful acquisition byPendragon. We believe that these concerns are simply without merit and reflecttheir lack of experience with large acquisitions. 2. The Lookers Acquisition Is Low Risk With Regard To Integration Consistent with Pendragon's previous acquisitions, we have developed a detailedplan for the integration of Lookers in conjunction with that of Reg Vardy.Pendragon's dealership support structure has been developed with the specificobjective of allowing the effective and efficient integration of newdealerships. In addition, Pendragon is organised along franchise lines andwithin that structure, where appropriate, there is also a regional structure. Combining Pendragon with Lookers should be looked upon as a series of smallintegrations created by splitting the Lookers business down into manageablepieces, normally along franchise lines. These smaller parts of Lookers will beallocated across a group of highly experienced Pendragon operational managersand accountants. The integration process is coordinated and monitored by seniormanagement through a real-time electronic integration task list. Pendragon's integration systems worked extremely well with CD Bramall which atthe time of its acquisition was a business almost the same size as Pendragon -in terms of relative sizes, the combination of Lookers plus Reg Vardy withPendragon is very similar. THE SUCCESS OF PENDRAGON'S STRATEGY HAS BEEN REFLECTED IN OUR PERFORMANCE 1. Pendragon Has Consistently Outperformed Lookers Pendragon's operational structure and strategy has delivered significant anddemonstrable outperformance in terms of value creation compared to the returnsthat Lookers Shareholders have received. Whilst our approach is ground-breaking,theirs is outdated. The fact that our strategy works is borne out by ourresults: Pendragon Lookers3 Year Total Shareholder Return 448% 291%3 Year Compound Annual Dividend Growth 24% 15%Rate3 Year Compound Annual EPS Growth Rate 33% 25%2005 Adjusted Operating Profit Margin 3.0% 2.2% 2. A Consistent Strategy Is Vital For Management Accountability Pendragon's stated strategy is to grow its relationships with selectmanufacturing partners and to deliver the benefits of increased scale through acombination of organic growth and further industry consolidation, consistentwith its acquisitions of CD Bramall and Reg Vardy and its Offer for Lookers. The Board of Lookers has a confused strategy. On the one hand it says that itwishes to participate in the consolidation of the industry, on the other hand itsays that it wants to return value to shareholders. In order to participate inconsolidation, businesses like Lookers need to have the financial resources tomake acquisitions. The fact that the Lookers proposed return of capital is conditional on them notbeing able to "secure suitable acquisitions before declaring its next annualdividend" demonstrates that these two strategies are incompatible. In addition,we question whether the Lookers Board is confident in its ability to securemeaningful acquisitions. If it is, why does it need the fall-back of the specialdividend or share buyback? I believe a company has to be able to communicate a clear, consistent strategyso that shareholders can judge management's performance and ultimately hold themaccountable if, as a consequence of an ill-conceived strategy, the company doesnot achieve its true potential. 3. Lookers Lacks A Consistent Strategy On Gearing Lookers' management seems not to have a consistent view on what level of gearingis appropriate for a motor vehicle retailer. They warn Lookers Shareholdersabout the risk of a transaction that will increase to 153 per cent. the gearingthat they are exposed to. However, just three months ago, the Lookers Board wasunanimously recommending that Lookers Shareholders agree to a transaction thatwould have increased gearing to over 650 per cent. Lookers Shareholders shouldask whether their board had a change of heart in the meantime or would theirproposed but unsuccessful acquisition of Reg Vardy have exposed their company tounmanageable levels of gearing. However, it seems that Lookers Shareholders will have to put up with increasedgearing in any event as the Lookers Board has admitted that it is seeking toleverage the Lookers asset base in order to provide funds to make furtheracquisitions (or return capital if their acquisition strategy fails again) andpay dividends. Therefore, presumably being exposed to increased gearing is notsuch a bad thing after all. The Lookers Board is now trying to raise concerns about gearing levels that areless than what they were only recently proposing for their own shareholders." Please see Appendix I to this announcement for further information on thesources and bases of certain statements set out in the extract above. Responsibility The directors of Pendragon accept responsibility for the information containedin this announcement, save that the only responsibility accepted by them inrespect of information in this announcement relating to Lookers and its group,which has been compiled from public sources, is to ensure that such informationhas been correctly and fairly reproduced and presented. Subject as aforesaid, tothe best of the knowledge and belief of the directors of Pendragon (who havetaken all reasonable care to ensure that such is the case), the informationcontained in this announcement is in accordance with the facts and does not omitanything likely to affect the import of such information. ENQUIRIESPendragon PLC Tel: 01623 725 114Trevor Finn, Chief Executive David Forsyth, Finance Director Citigroup Global Markets Limited Tel: 020 7986 4000Philip Robert-Tissot Sam Small Chris Zeal (Corporate Broking) Finsbury GroupRupert Younger Tel: 020 7251 3801 Gordon Simpson Citigroup Global Markets Limited, which is authorised and regulated in theUnited Kingdom by the Financial Services Authority, is acting exclusively forPendragon and no one else in connection with the Offer and will not beresponsible to any other person for providing the protections afforded toclients of Citigroup Global Markets Limited or for providing advice in relationto the Offer. This announcement does not constitute, or form part of, any offer for, or anysolicitation of any offer for, securities. Any acceptance or other response tothe Offer should be made only on the basis of information referred to in theOffer Document. The contents of this announcement have been approved, solely for the purposes ofsection 21 of the Financial Services and Markets Act 2000, by Citigroup GlobalMarkets Limited of Citigroup Centre, Canada Square, Canary Wharf, London E145LB. The Offer is not being and will not be made, directly or indirectly, in or into,or by use of the mails of, or by any means or instrumentality (including,without limitation, facsimile transmission, electronic mail, telex or telephone)of interstate or foreign commerce of, or any facilities of a national securitiesexchange of, the United States, Canada, Australia or Japan and the Offer willnot be capable of acceptance by any such use, means, instrumentality orfacility, directly or indirectly from or within the United States, Canada,Australia or Japan. Accordingly, neither this Announcement nor the PendragonCircular nor the Information Memorandum nor the Offer Document nor the Form ofAcceptance is being, and must not be, mailed or otherwise forwarded,transmitted, distributed or sent in, into or from the United States of America,Canada, Australia or Japan. Doing so may render invalid any purported acceptanceof the Offer. All Lookers Shareholders or other persons, (including nominees,trustees or custodians) who would or otherwise intend to, or may have acontractual or legal obligation to, forward this Announcement and/or thePendragon Circular and/or the Information Memorandum and/or the Offer Documentand/or the Form of Acceptance to any jurisdiction outside the United Kingdom,should refrain from doing so and seek appropriate professional advice beforetaking any action. The Offer is not an offer of securities for sale in the United States of Americaor in any jurisdiction in which such an offer is unlawful. The New PendragonShares to be issued in connection with the Offer have not been, nor will theybe, registered under the US Securities Act of 1933, as amended, or under thesecurities laws of any state of the United States of America and may not beoffered or sold in the United States of America, absent registration or anapplicable exemption from registration. No public offering of the securitieswill be made in the United States of America. The relevant clearances have notbeen, and will not be, obtained from the securities commission of any provinceor territory of Canada; no prospectus or a prospectus equivalent has been, orwill be, lodged with, or registered by, the Australian Securities andInvestments Commission or the Japanese Ministry of Finance and the NewPendragon Shares have not been, and nor will they be, registered under oroffered in compliance with applicable securities laws of any state, province,territory or jurisdiction in Canada, Australia or Japan. Accordingly, PendragonShares may not (unless an exemption under relevant securities laws isapplicable) be offered, sold, resold or delivered, directly or indirectly, in orinto Canada, Australia or Japan or any other jurisdiction outside the UnitedKingdom if to do so would constitute a violation of the relevant laws of, orrequire registration thereof in, such jurisdiction or to, or for the account orbenefit of, a person located in Canada, Australia or Japan. This Announcement contains a number of forward-looking statements relating toPendragon and Lookers with respect to, among others, the following: financialconditions; results of operation; the businesses of Pendragon and Lookers;future benefits of the transaction; and management plans and objectives.Pendragon considers any statements that are not historical facts as "forward-looking statements". They involve a number of risks and uncertaintiesthat could cause actual results to differ materially from those suggested by theforward-looking statements. Important factors that could cause actual resultsto differ materially from estimates or forecasts contained in theforward-looking statements include, among others, the following possibilities:future revenues are lower than expected; costs or difficulties relating to thecombination of the businesses of Pendragon and Lookers, or of other futureacquisitions, are greater than expected; expected cost savings from thetransaction or from other future acquisitions are not fully realised or notrealised within the expected time frame; competitive pressures in the industryincrease; general economic conditions or conditions affecting the relevantindustries, whether internationally or in the places Pendragon and Lookers dobusiness are less favourable than expected, and/or conditions in the securitiesmarket are less favourable than expected. Except as required by the ProspectusRules, Listing Rules and Disclosure Rules of the UK Listing Authority, theLondon Stock Exchange or applicable law, Pendragon expressly disclaims anyobligation or undertaking to release publicly any updates or revisions to anyforward-looking statements contained in this announcement to reflect any changein Pendragon's expectations with regard thereto or any change in events,conditions or circumstances on which any statement is based. APPENDIX I SOURCES AND BASES (a) Unless otherwise indicated, the statements in this announcement are theviews and beliefs of the directors of Pendragon; (b) Unless otherwise indicated, the information in this document is derivedfrom Lookers' circular to Lookers Shareholders dated 19 April 2006, Lookers'unaudited first quarter trading update for the three months to 31 March 2006,Lookers' published audited preliminary results for the year ended 31 December2005, Lookers' published consolidated annual report and accounts for the yearsended 31 December 2002 to 2004 or from Pendragon's published consolidated annualreport and accounts for the years ended 31 December 2002 to 2005. (c) The closing middle market prices of Pendragon Shares and Lookers Shareshave been derived from the Daily Official List. (d) Profit Forecast Lookers has forecast earnings per share of 49 pence in 2006, as sourced frompage 4 of Lookers' circular to Lookers Shareholders dated 19 April 2006. Theanalyst consensus earnings estimate in 2006 for Lookers is 40.04 pence assourced from the "Broker Forecast" page in the "Investor Relations" section ofthe Lookers website. The analyst consensus earnings estimate in 2006 for Lookers of 40.04 pencedivided by 37.7 pence, being Lookers' adjusted earnings per share for the yearended 31 December 2005, subtracting 1 and multiplying by 100 per cent. (in orderto express solely the increase as a percentage), implies an annual growth rateof 6.2 per cent. between the 2005 and 2006 financial years. The 2005 adjustedearnings per share of 37.7 pence is extracted from the "Consolidated IncomeStatement (Summarised)" section of Lookers' audited preliminary results for theyear ended 31 December 2005, and is the earnings per share number stated beforeexceptional items, goodwill impairment and amortisation of intangible assets. Lookers' forecast earnings per share of 49 pence divided by 37.7 pence, impliesan annual growth rate of 30.0 per cent. between the 2005 and 2006 financialyears. The growth rate implied by Lookers' forecast earnings is therefore 4.8x thatimplied by the analyst consensus earnings estimate, as calculated by 30.0 percent. divided by 6.2 per cent. (e) Premium Based on the Closing Price of 623.5 pence per Pendragon Share on 20 April 2006,being the latest practicable date prior to the publication of this announcement,and the Offer of 1.15 Pendragon Shares for each Lookers Share, the Offer valueseach Lookers Share at 717 pence (correct to the nearest whole pence). The average Closing Price of 370.7 pence per Lookers Share for the year prior toPendragon's approach is the average Closing Price for Lookers Shares for theperiod from 27 January 2005 to 26 January 2006, being the last business dayprior to the announcement by Pendragon of the terms of a possible offer forLookers. The Offer represents a premium of 93 per cent. to this average price, calculatedusing 717 pence divided by 370.7 pence and subtracting 1 and multiplying by 100per cent. (in order to express solely the increase as a percentage). The Closing Price for Lookers Shares on 26 January 2006 was 509.0 pence. TheOffer represents a premium of 41 per cent. to this closing price, calculatedusing 717 pence divided by 509.0 pence and subtracting 1 and multiplying by 100per cent. (in order to express solely the increase as a percentage). The Closing Price for Lookers Shares on 15 November 2005 was 415.5 pence. TheOffer represents a premium of 73 per cent. to this closing price, calculatedusing 717 pence divided by 415.5 pence and subtracting 1 and multiplying by 100per cent. (in order to express solely the increase as a percentage). (f) Exit multiples Pendragon's Offer for Lookers represented an exit price/2005 earnings multipleof 19.2x, calculated by dividing 724.5 pence, being the implied price of thePendragon Offer based on Pendragon's share price of 630 pence on 4 April 2006and the Offer terms of 1.15 Pendragon Shares for each Lookers Share, by 37.7pence, being Lookers' adjusted earnings per share for the year ended 31 December2005, extracted from the "Consolidated Income Statement (Summarised)" section ofLookers' audited preliminary results for the year ended 31 December 2005. Theearnings per share number is stated before exceptional items, goodwillimpairment and amortisation of intangible assets. Pendragon's offer for Reg Vardy represented an exit price/last twelve months'earnings multiple of 19.1x, calculated by dividing 900 pence, being thePendragon offer price for each Reg Vardy share, by 47.1 pence, being Reg Vardy'sadjusted earnings per share for the last twelve months ended 31 October 2005.Reg Vardy's adjusted earnings per share for the last twelve months ended 31October 2005 is calculated by adding the adjusted earnings per share for the sixmonths ended 31 October 2005 of 26.7 pence to the adjusted earnings per sharefor the year ended 30 April 2005 of 46.0 pence and subtracting the adjustedearnings per share for the six months ended 31 October 2004 of 25.6 pence. Theseearnings per share numbers are extracted from note 5 of Reg Vardy's InterimResults for the six months ended 31 October 2005. The earnings per share numbersare stated before exceptional items and amortisation of intangible assetsarising on acquisition. Pendragon's offer for CD Bramall represented an exit price/last twelve months'earnings multiple of 11.3x, calculated by dividing 600 pence, being thePendragon offer price for each CD Bramall share, by 53.0 pence, being CDBramall's adjusted earnings per share for the last twelve months ended 30 June2003. CD Bramall's adjusted earnings per share for the last twelve months ended30 June 2003 is calculated by adding the earnings per share for the six monthsended 30 June 2003 of 31.27 pence to the earnings per share for the year ended31 December 2002 of 45.29 pence and subtracting the earnings per share for thesix months ended 30 June 2002 of 24.71 pence. To this is added CD Bramall'samortisation per share for the last twelve months ended 30 June 2003, calculatedby adding the amortisation per share for the six months ended 30 June 2003 of0.7 pence (being amortisation for the six months ended 30 June 2003 of £269,000,assumed to equal half that of the twelve months to 31 December 2003, divided bythe weighted average number of ordinary shares in issue of 38,204,809) to theamortisation per share for the year ended 31 December 2002 of 0.9 pence (beingamortisation for the twelve months ended 31 December 2002 of £328,000 divided bythe weighted average number of ordinary shares in issue of 37,820,920) andsubtracting the amortisation per share for the six months ended 30 June 2002 of0.4 pence (being amortisation for the six months ended 30 June 2002 of £164,000,assumed to equal half that of the twelve months to 31 December 2002, divided bythe weighted average number of ordinary shares in issue of 37,705,005). Earningsper share numbers are extracted from page 38 of Pendragon's Offer Document inrelation to its acquisition of CD Bramall, amortisation numbers are extractedfrom page 15 of CD Bramall's 2003 Report and Accounts. The weighted averagenumber of ordinary shares for the six months ended 30 June 2003 and the sixmonths ended 30 June 2002 are extracted from page 41 of Pendragon's OfferDocument in relation to its acquisition of CD Bramall, and the weighted averagenumber of ordinary shares for the twelve months ended 31 December 2002 isextracted from page 19 of the same document. The earnings per share numbers arestated before amortisation. Lookers' offer for Reg Vardy represented an exit price/last twelve months'earnings multiple of 18.6x, calculated by dividing 875 pence, being the Lookersoffer price per Reg Vardy share, by 47.1 pence, being Reg Vardy's adjustedearnings per share for the last twelve months ended 31 October 2005 as detailedabove. (g) Total shareholder return The three year total shareholder return percentages for Pendragon and Lookersare calculated using the Datastream return index ("RI") for Pendragon andLookers over the period from 27 January 2003 to 26 January 2006, being the lastbusiness day prior to the announcement by Pendragon of the terms of a possibleoffer for Lookers. Total shareholder return is the theoretical growth in valueof a shareholding over a specified period, assuming that dividends arere-invested to purchase additional units of an equity at the closing priceapplicable on the ex-dividend date. Pendragon's total shareholder return of 448per cent. is calculated as 3,901 pence, being Pendragon's RI on 26 January 2006,divided by 712 pence, being Pendragon's RI on 27 January 2003, subtracting 1 andmultiplying by 100 per cent. (in order to express solely the increase as apercentage). Lookers' total shareholder return of 291 per cent. is calculated as59,085 pence, being Lookers' RI on 26 January 2006, divided by 15,099 pence,being Lookers' RI on 27 January 2003, and subtracting 1 and multiplying by 100per cent. (in order to express solely the increase as a percentage). (h) Dividend growth rate Pendragon's 3 year compound annual dividend growth rate of 24 per cent. iscalculated using 13.20 pence, being the total dividend per share attributable tothe year ended 31 December 2005, extracted from page 1 of Pendragon's AnnualReport and Accounts 2005, divided by 6.88 pence, being the adjusted totaldividend per share attributable to the year ended 31 December 2002, taking thethird root (representing the three annual periods) and subtracting 1 andmultiplying by 100 per cent. (in order to express solely the increase as apercentage). The total dividend per share attributable to the year ended 31December 2002 of 6.88 pence is calculated using the reported total dividend pershare of 17.2 pence, extracted from page 1 of Pendragon's 2002 Annual Report andAccounts, divided by 5/2, reflecting the 3 for 2 bonus share issue whichoccurred on 15 July 2003, extracted from page 4 of Pendragon's 2003 AnnualReport and Accounts. Lookers' 3 year compound annual dividend growth rate of 15 per cent. iscalculated using 15.25 pence, being the total dividend per share attributable tothe year ended 31 December 2005, extracted from the "2005 Results Highlights"section of Lookers' 2005 audited preliminary results for the year ended 31December 2005, divided by 10.00 pence, being the total dividend per shareattributable to the year ended 31 December 2002, extracted from page 2 ofLookers' 2002 Annual Report and Accounts, taking the third root (representingthe three annual periods) and subtracting 1 and multiplying by 100 per cent. (inorder to express solely the increase as a percentage). (i) EPS growth rate Pendragon's 3 year compound annual EPS growth rate of 33 per cent. is calculatedusing 33.4 pence, being the adjusted earnings per share for the year ended 31December 2005, divided by 14.3 pence, being the adjusted earnings per PendragonShare for the year ended 31 December 2002, taking the third root (representingthe three annual periods) and subtracting 1 and multiplying by 100 per cent. (inorder to express solely the increase as a percentage). Both EPS numbers areextracted from page 1 of Pendragon's Annual Report and Accounts 2005. Lookers' 3 year compound annual EPS growth rate of 25 per cent. is calculatedusing 37.7 pence, being the adjusted earnings per Lookers Share for the yearended 31 December 2005, extracted from the "Consolidated Income Statement(Summarised)" section of Lookers' audited preliminary results for the year ended31 December 2005, divided by 19.3 pence, being the adjusted earnings per sharefor the year ended 31 December 2002, extracted from page 34 of Lookers' AnnualReport and Accounts 2003, taking the third root (representing the three annualperiods) and subtracting 1 and multiplying by 100 per cent. (in order to expresssolely the increase as a percentage). (j) Gearing Lookers' net debt to net assets ratio had it acquired Reg Vardy would be 673 percent. This is calculated using the sum of Lookers' net debt at 31 December 2005of £71.6m, Reg Vardy's equity value of £492.2m as implied by Lookers' offerprice of 875 pence per Reg Vardy share, Reg Vardy's net debt at 31 October 2005of £21.5m and Lookers' estimated acquisition costs for the Reg Vardy transactionof £22.0m, divided by £90.2m, being Lookers' net assets position at 31 December2005. Lookers' net debt is calculated as the sum of £21.3m and £52.7m, which wereLookers' short term and long term debt positions respectively, subtracting£2.4m, which was Lookers' cash and cash equivalents position. Lookers' debt,cash and net assets numbers are extracted from the "Consolidated Balance Sheet(Summarised)" section of Lookers' audited preliminary results for the year ended31 December 2005. Reg Vardy's net debt at 31 October 2005 of £21.5m is the sum of £7.1m and£56.1m, which were Reg Vardy's short term and long term debt positionsrespectively, subtracting £41.8m, which was Reg Vardy's cash and cashequivalents position. Reg Vardy's equity value of £492.2m and Lookers' estimatedacquisition cost for the Reg Vardy transaction of £22.0m are extracted from the"Unaudited Pro Forma Net Asset Statement as at 30 June 2005" section on page 61of Lookers' Circular to Shareholders on its proposed acquisition of Reg Vardydated 27 January 2006. Reg Vardy's debt and cash numbers are from the page 50 ofthe same document. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
PDG.LLOOK.L