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Lithia (LAD) Partners With Pinewood, Buys Pendragon's Divisions

Lithia LAD signs a deal to partner with Pinewood Technologies and acquire the U.K. motor and fleet management divisions of Pendragon. The acquisition will help Lithia expand its presence in the U.K. market and is estimated to generate more than $4.5 billion in annual revenues.

Per the agreement, the current Pendragon business that incorporates the Pinewood DMS platform will stay listed on the London Stock Exchange with the name Pinewood Technologies plc and will turn into pure-play software as a service business.

Using Pinewood’s technology platform, Lithia will enhance its digital capabilities in its U.K. operations. Lithia and Pinewood Technologies will form a joint venture to co-develop automotive technology solutions to reap the benefits of the opportunities that the North American market has to offer. Lithia will own 16.7% of the remaining Pinewood business after the transaction.

Through the acquisition of Pendragon Vehicle Management (PVM), Lithia will add a highly profitable fleet management services business to its portfolio. The business-to-business fleet management model is expected to lay a strong foundation for global growth. With PVM’s experienced leadership team on board, Lithia will lead with a focus on growth.

The transaction reflects Lithia's intent to keep investing in the evolving U.K. automotive industry and to provide its customers with flexibility via omni-channel and eCommerce optionality.  

Pendragon’s UK motor and fleet management divisions complement Lithia's existing U.K. brand and geographic footprint and the combined platform represents 3.6% of the new vehicle market share. After completion, the combined business will report to Neil Williamson, president of Lithia U.K.

Bryan DeBoer, president and CEO of Lithia & Driveway, said that the partnership with Pinewood Technologies and Pendragon's U.K. motor and vehicle management division buyout is a crucial step toward the company’s long-term growth strategy. This transaction underpins Lithia’s previously stated goal of making $2.00 of EPS for every $1 billion in revenues in the future.

Zacks Rank & Key Picks

LAD currently carries a Zacks Rank #3 (Hold).

Some top-ranked players in the auto space include Oshkosh Corporation OSK, Gentex Corporation GNTX and Allison Transmission Holdings, Inc. ALSN, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for OSK’s 2023 sales and earnings implies year-over-year growth of 15% and 126.9%, respectively. The EPS estimate for 2023 has moved north by $1.75 in the past 60 days. The EPS estimate for 2024 has moved up by 6 cents in the past 30 days.

The Zacks Consensus Estimate for GNTX’s 2023 sales and earnings indicates year-over-year rises of 17.3% and 29.4%, respectively. The EPS estimates for 2023 and 2024 have moved up by 9 cents each in the past 60 days.

The Zacks Consensus Estimate for ALSN’s 2023 sales and earnings suggests year-over-year increases of 9.4% and 25.3%, respectively. The EPS estimate for 2023 and 2024 has moved up by 39 cents and 43 cents, respectively, in the past 60 days.

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