Mike Allen, from stockbroker Panmure Gordon, said Petchey was likely to have considered Pendragon's shares undervalued and to have increased his stake in the group as a long term investment. Pendragon's market value has dropped by 75 per cent in the last year. Allen described Petchey as an “activist shareholder” who would look at Pendragon as a “value opportunity”. “He has a longer term investment horizon than other investors,” said Allen. “Most will not want to get caught in another downgrade.”

Petchey is understood to have accumulated his holding in Pendragon through the acquisition of CFDs (contracts for differences), which do not have to be disclosed in the same way as conventional investments. He is also known to hold a 4.5 per cent stake in rival group Lookers, a £259m takeover target of Pendragon's in 2006, but through the acquisition of undeclared CFDs this holding could be higher.

Speculation was rife last week that Petchey could seek to pressurise Pendragon into realising value through the sale of freehold property or even to force a merger with another major group such as Lookers. Pendragon, however, welcomed Petchey's investment in the business. Chief executive Trevor Finn told Motor Trader: “He is an astute investor. Historically he understands the automotive business and his other investments usually have strong asset backing. He obviously sees the same value in Pendragon.” The 82-year-old entrepreneur has a background in the motor trade as an Austin Morris dealer and a track record of investing in dealer groups. Last year his investment company Trefick sold its 18 per cent stake in HR Owen to Australian importer Balverona, which has since sold on its holding in the group to Bentley. Trefick also previously held shares in European Motor Holdings. Petchey is a philanthropist whose Jack Petchey Foundation has given grants of more than £60m to charities working with young people in east London. Pendragon was set to hold its annual general meeting at the end of last week. Panmure Gordon forecast its stocks could rally if it reported a reasonably positive performance in March.