Chief executive Ken Surgenor said: “We have the firepower to continue to grow, there are opportunities out there.”
Pendragon eventually beat off Lookers' challenge in the battle for Reg Vardy, which was ranked second in the Motor Trader Top 200, but only after it had been forced to raise its original offer of 800 pence a share to 900 pence, which saw it capture the group for £506m.
“We paid £50m more than we'd have liked but it was still a good deal,” said Pendragon's chief executive Trevor Finn.
Lookers received substantial financial backing for its own cash bid of 875 pence per Vardy share and claimed the deal would have made an ideal market fit – possibly creating a more complementary business mix than the amalgamation of Vardy into Pendragon. The group insisted its motive in bidding for the north east-based group had not been to push the purchase price up for Pendragon.
“We weren't in for Vardy to make Pendragon pay more,” said finance director David Dyson.
“We were also not in it to build a massive empire, we saw value in it,” said Surgenor. “We have no desire to build the biggest group in the UK,” he added.
Surgenor said Lookers and Vardy shared similar, decentralised operational strategies.
“The decision-making is passed down in Lookers and Vardy, the Pendragon model is centralised.”
“What works in one area won't work in another – one size fits all won't work,” he claimed.
Nevertheless, Lookers now finds itself having to fend off a hostile £260m share-swap takeover bid from Pendragon as the giant group has revived its plan, first mooted in the New Year, to merge the three companies. Lookers reiterated its view that the offer significantly undervalued the company and argued a merger would risk a loss of franchises.
Dyson said: “It's not difficult to defend our opposition to the acquisition when the price is not right.” He emphasised that the all-paper offer posed risks to the shareholders. With a cash offer “that risk is gone”. He described Pendragon's move to go hostile with a fixed offer as “aggressive”.
“If someone comes along with the right price we would have a duty to back the offer,” added Surgenor.
He said adding Lookers' 130 outlets to the 100 taken on with Vardy would double the size of Pendragon's network and present an “operational risk”.
He said Pendragon would risk losing the franchises represented by Lookers that were not in its own portfolio, such as five Volkswagen and one Seat dealership plus the Bentley franchise in Belfast as well as six franchises for Toyota and two for Lexus.
Shortly after Pendragon bought Vardy it sold the five VW sites that came with the deal back to the car maker, which immediately transferred them to its preferred retail partners.
Lookers also claimed a merger with Pendragon would leave some brands overexposed to the enlarged group. It said the group would control up to 40 per cent of Ford's Premier Automotive Group sales and about 15 per cent of Vauxhall volumes.
Pendragon is set to post its offer document by 6 April, after which Lookers will set out its defence. As a sweetener to shareholders, Lookers raised its total dividend by 26 per cent to 15.25 pence.
If the approach is rejected Pendragon will be prohibited by stock market rules from renewing its bid within 12 months.
Within this period, Lookers could arguably discourage a further bid by taking on extra debt with a major acquisition of its own – Top 10 group European Motor Holdings has consistently been cited as a takeover target for predators. Last year Lookers spent £40m on acquisitions, including two used car supermarkets, Vauxhall and Volvo businesses and parts distributor Apec.