The deal includes forming a joint venture for Pendragon’s dealership management system, Pinewood Technologies which has about 30,000 users in Europe, Africa and Asia.

Lithia plans to acquire Pendragon’s 160 retail locations across the UK, most of which are new-vehicle dealerships under the Stratstone or Evans Halshaw branding.

It also includes Pendragon Vehicle Management, a vehicle fleet management platform with about 20,000 vehicles in the UK.

Lithia CEO Bryan DeBoer

Lithia will hold a 16.7 per cent stake in the software business Pinewood Technologies once the transaction closes, which is expected in the fourth quarter or first quarter of 2024, said Lithia CEO Bryan DeBoer in an interview with Automotive News.

Lithia then will begin to convert its existing UK dealerships — a majority of which it acquired in March when it bought Jardine Motors Group — to the Pinewood system.

Lithia also plans to form a joint venture with Pinewood to eventually bring a DMS to the US and Canada.

“Together with Pinewood, Lithia is going to leverage its assets to build a North American DMS system to bring to market over the next three to five years,” Mr DeBoer told Automotive News. 

“We don’t know the exact timing, but we’re working on that together. That’s a massive TAM (total addressable market) to be able to expand the profit margins of Pinewood.”

Mr DeBoer said Pinewood was a profitable software company that is cloud based and tech-savvy.

Lithia said the Pendragon acquisitions are expected to add $US4.5 billion ($A7b) in annual revenue, the largest to date of any of its major purchases.

Once the deal closes, Lithia estimates its annualised revenues to be over $US38 billion ($A59b), getting it closer to its goal of $US50 billion ($A77.8b) annualised revenue by the end of 2025.

Lithia said the partnership and acquisition of Pendragon’s dealership and fleet business will cost $US350 million ($A544m) and that it plans to finance the transaction using existing on-balance sheet capacity.

Pendragon CEO Bill Berman, a former AutoNation COO, will stay on as CEO of Pinewood, Mr DeBoer said.

“The launch of Pinewood as a standalone company is a unique and exciting opportunity to create a best-in-class product for customers, which we can market globally and drive substantial value for our shareholders and in Lithia we have the perfect partner to help accelerate Pinewood’s push into the hugely attractive North American DMS market,” Mr Berman said in a statement.

For Lithia, a completed Pendragon transaction would be a long time coming. In August 2022, there were reports that named Lithia as the unidentified bidder in a failed deal to buy Pendragon. 

Mr DeBoer confirmed that Lithia had discussions then with Pendragon, adding that his company backed away. Now, by adding Pendragon, Lithia has everything it needs in the UK, he said.

“It does round out our footprint, whereas Jardine is primarily Midlands and London,” Mr DeBoer said, referring to the group it bought in March. 

“This adds a lot more north of London, in the eastern part of the Midlands, as well as a fairly sizable expansion into the northern part of the country and Scotland.”

The Jardine acquisition aligned with Lithia’s goal to focus on growth in English-speaking countries, Mr DeBoer said. The company previously expressed interest in growing in Australia.

Lithia’s acquisition of Jardine Motors Group in the UK in March this year was similar in store count and revenue to its 2021 deal to buy Michigan’s Suburban Collection.

Buying Jardine’s immediately gave Lithia, already the biggest new-vehicle dealership group in the US, significant scale in an international market.

Jardine’s added more than 40 new-vehicle dealerships in the UK to Lithia’s portfolio, including stores selling luxury brands Aston Martin, Porsche, Mercedes-Benz and BMW. 

By entering the UK, Lithia also gained direct exposure to the agency model of retail.

At the time, Lithia said Jardine’s would add more than $US2 billion ($A3.1b) to its annual revenue.

Lithia ranks No. 1 on Automotive News’ list of the top 150 dealership groups based in the US, retailing 271,596 new vehicles in 2022. Lithia’s sales figures include dealerships outside of the US.

By Neil Dowling