Lithia Motors Inc. now owns more than a quarter of Pinewood Technologies, a U.K. dealership management systems provider, after buying nearly 5 million shares in the months since the group’s initial minority investment.
“Regarding the investment in Pinewood, we value the partnership with Pinewood and see opportunities to continue creating synergies across our customer ecosystem,” Lithia spokesman Jardon Jaramillo wrote in an email on June 26 when asked about the purchases.
Pinewood, which was part of the Pendragon group of utilities, was spun off and became a publicly traded company owned by former Pendragon shareholders after Lithia closed the deal with the group on Jan. 31.
That £397 million ($481 million) purchase handed Lithia Pendragon’s auto retail network and fleet management business, plus a minority stake in the DMS provider. Under the terms of the acquisition approved by Pendragon shareholders in 2023, Lithia would receive at least 16.67 percent of Pinewood and would have the option to take that stake up to 19.84 percent.
Pinewood reported Feb. 5 that Lithia owned 19.86 percent of the company. Jaramillo said Lithia acquired the 19.84 percent available in the deal and then bought another 0.02 percent that was available for sale.
On April 22, Pinewood shareholders approved a 20-for-1 share consolidation across the company, which would have turned Lithia’s 19.86 percent stake into 17,297,677 shares. The day after the vote, Lithia would have a $67.8 million stake in Pinewood, using historical stock closing data from the company and historical exchange rate data from online currency exchange and payments company OFX.
Lithia purchased an additional 4,916,807 shares of Pinewood stock for what would be approximately $23.1 million based on historical closing stock prices and OFX exchange rate data from the reported acquisition dates. The OFX exchange rate data is calculated from the purchase dates listed in Pinewood’s regulatory filings. This series of purchases by Lithia began with it increasing its stake in the provider to 20.92% on May 29, according to a Pinewood regulatory filing. The most recent transaction saw Lithia reach 25.5% ownership on June 21, according to another Pinewood filing.
Lithia has promised to add 7,500 UK car dealership users to DMS, alongside its “already committed 2,500 users” in the country. It also plans to eventually bring DMS to the US.
“We are excited about the progress our Lithia UK platform is making with Pinewood Technologies as we continue to convert our stores there onto a single platform,” Lithia CEO Bryan DeBoer said on a second-quarter earnings call. “This quarter, our investment in Pinewood … generated a good return, which reflects the market’s positive view of the platform’s possibilities.”
Pinewood’s stock purchases come at a time when Lithia is buying back its own shares. DeBoer said Lithia would buy its own shares rather than buy other dealerships when the company is trading at a lower earnings multiple than what other dealerships are demanding to sell their stores.
During the second quarter, Lithia bought back about 793,000 shares of itself — 2.9 percent of its outstanding shares — at a weighted average cost of $256 per share, or about $203 million. The company said it has spent $217.2 million in the past six months buying back its shares.