REG - Pinewood Tech Gp PLC - Acquisition of Lithia’s Stake in North America JV
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RNS Number : 7779L Pinewood Technologies Group PLC 06 June 2025
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JURISDICTION
FOR IMMEDIATE RELEASE
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
6 June 2025
Pinewood Technologies Group plc
("Pinewood.AI" or the "Company")
Acquisition of Lithia's Majority Stake in North America JV for New Ordinary
Shares
Agreement with Lithia for DMS Contract and Roll-Out Scheduled by End of 2028
Publication of Circular in relation to a Proposed Rule 9 Waiver
Pinewood.AI, a leading pure-play cloud-based software business providing
innovative retail solutions to the automotive industry, is pleased to announce
that it has entered into an acquisition agreement (the "Acquisition
Agreement") with Lithia UK Holdings Limited (the "Seller"), a wholly-owned
subsidiary of Lithia Motors, Inc. ("Lithia"), for the acquisition of the
Seller's 51 per cent. interest in Pinewood North America LLC (the "Joint
Venture") for a total consideration of $76.5 million to be satisfied by the
issue of 14,560,691 new ordinary shares (the "New Ordinary Shares") in the
capital of Pinewood.AI (the "Acquisition"). The New Ordinary Shares will be
issued at a price of 386.5 pence per New Ordinary Share, being the
volume-weighted average price of Pinewood.AI's ordinary shares during the
thirty-day period preceding the date of this announcement. The Acquisition
values the Joint Venture at $150 million in total, which is supported by the
independent valuation work performed by Kroll, LLC ("Kroll") and as further
described below.
Pinewood.AI is also delighted to announce that, subject to completion of the
Acquisition ("Completion"), it will enter into a five year contract with
Lithia to roll-out Pinewood.AI's software to all of Lithia's current and
future sites across the US and Canada by the end of 2028 at the latest (the
"DMS Contract" and, together with the Acquisition, the "Transaction"). Once
the Pinewood Automotive Intelligence™ platform has been fully deployed
across all existing Lithia stores in North America, Pinewood.AI expects to
generate approximately $40 million in annual recurring revenue based on the
current suite of Pinewood.AI products from Lithia in North America.
Furthermore, upon completion of the additional North America-specific layered
applications (targeted by the end of 2028), Pinewood.AI anticipates total
annual revenue from Lithia in North America to increase to approximately $60
million.
Acquisition Highlights and Strategic Rationale
The Independent Directors* believe that the Acquisition would unlock
compelling strategic and commercial opportunities for the Pinewood.AI group
across North America, and in particular:
· Unlocking North America: the Acquisition would unlock
broader adoption of the Pinewood.AI products among North American dealer
groups by removing the perceived 'competitor overhang' (a consequence of
Lithia's majority stake in the Joint Venture), positioning the Company to
capture a significant share of the $6.5 billion North American automotive
dealer software market;
· Full Strategic Control: acquiring Lithia's majority
stake in the Joint Venture would give Pinewood.AI complete control over its
North American platform, enabling faster execution, greater commercial agility
and the ability to fully capitalise on early market momentum as its North
American product reaches commercial readiness over the coming months;
· Lithia North American Roll-out Terms Agreed:
Pinewood.AI and Lithia have agreed pricing for Lithia's use of Pinewood.AI's
DMS platform, layered apps, and third-party integrations pursuant to the DMS
Contract, which will also secure Lithia's contractual commitment to roll-out
Pinewood.AI's software across all current and future sites across the US and
Canada by 31 December 2028, subject to the commercial readiness of
Pinewood.AI's products for deployment in North America;
· Supports Medium-Term Growth Ambitions: the
Independent Directors consider the Acquisition to be a key enabler of
Pinewood.AI's medium-term ambition to scale in North America and deliver
sustainable EBITDA growth, with an updated medium-term target for the
financial year ending 31 December 2028 ("FY 2028") to be communicated later
this year, following Completion;
· Enhanced Financial Clarity: the Acquisition would
simplify Pinewood.AI's corporate structure, enabling full revenue
consolidation, and enhancing transparency in financial reporting, delivering
clearer performance visibility;
· Strengthened Strategic Partnership with Lithia:
Lithia remains a key customer and committed long-term minority strategic
shareholder, and would be contractually committed to a full roll-out of
Pinewood.AI's software across its North American dealerships under the DMS
Contract, reinforcing long-term alignment between Pinewood.AI and Lithia; and
· Valuation Supported by Independent Opinion: the
acquisition price is underpinned by a third-party valuation from Kroll, which
estimates the fair market value of the Seller's 51 per cent. interest in the
Joint Venture at $73.0 - $86.1 million (based on a discounted cashflow
analysis of the roll-out, which is expected to be contractually committed
under the DMS Contract, across Lithia's North American sites only).
*The "Independent Directors" are the directors of Pinewood.AI other than
Christopher Holzshu and George Hines, who are appointed by the Seller to the
board of Pinewood.AI pursuant to the terms of a relationship agreement between
the Company and the Seller.
Bill Berman, Chief Executive Officer of Pinewood Technologies Group plc,
commented:
"We are delighted to have reached an agreement with Lithia to acquire the
majority stake of the North America joint venture. The US and Canada are
central to our growth strategy, and through the Joint Venture, we have made
significant progress towards commercialising the Pinewood.AI platform for the
North American market. Assuming full control of the Joint Venture will
strengthen our ability to fully capitalise on the opportunities available in a
key strategic growth market.
Today, we are also announcing that we have agreed the terms of a five-year
contract with Lithia to implement the Pinewood Automotive Intelligence™
Platform across all its current and future sites by the end of 2028. This is a
significant milestone on our journey to entering the North American market and
we remain on track to pilot the platform in Lithia's US stores in the second
half of 2025, with the full system roll-out commencing in 2026.
I would like to take this opportunity to thank Lithia for their partnership in
the joint venture and we look forward to working with them as a key customer
long into the future."
Bryan DeBoer, Chief Executive Officer of Lithia Motors, Inc., commented:
"This agreement represents the next step in our strategic partnership with
Pinewood.AI and supports our vision to modernize customer experiences across
our ecosystem. As Pinewood.AI's largest global customer, we are excited to
partner in the rollout of their platform across our North American network and
accelerate our transformation into a fully integrated, data-driven retailer.
Pinewood.AI is now able to emerge as the leading automotive intelligence
provider in the U.S.. Each of our global stores are committed to the Pinewood
Automotive Intelligence™ Platform, and we will continue partnering on
best-in-class product development."
Background to and Reasons for the Acquisition
On 1 February 2024, the Company, formerly named Pendragon PLC, announced
completion of the disposal of its UK Motor and Vehicle Management (PVM)
divisions to Lithia (the "Disposal"). As a result of the Disposal, the Company
no longer retained any of its UK motor business and leasing business and
became a pure play Software-as-a-Service ("SaaS") business. The ordinary
shares of the Company (the "Ordinary Shares") remained admitted to trading on
the Main Market of the London Stock Exchange plc, with the Company operating
as a standalone SaaS business under the new company name "Pinewood
Technologies Group PLC". In addition, Pinewood.AI and Lithia, through their
respective subsidiaries, entered into a joint venture agreement for the
principal purpose of co-developing and commercialising in the United States of
America and Canada the North American version of Pinewood.AI through
investment in a joint venture, which is operated through the Joint Venture.
The Company (through its subsidiary, Pinewood US Holdings LLC) currently holds
49 per cent. of the equity interest in the Joint Venture and Lithia (through
its subsidiary, PNA Holding LLC ("Lithia JVCo")) holds the remaining 51 per
cent. equity interest.
Notwithstanding the significant progress made in commercialising the
Pinewood.AI product and developing the business plan, Pinewood.AI and Lithia
have subsequently recognised that further upside could be unlocked from
Pinewood.AI obtaining full control of the Joint Venture. The Company is
currently on course to pilot the Pinewood Automotive Intelligence™ platform
in Lithia's US stores in the second half of 2025, with a view to commencing
the full system roll-out into North America in 2026. To date, the Joint
Venture has proven highly valuable in accelerating and optimising product
development for commercial readiness in the North American market. However, as
the Company progresses with the roll-out of its platform into the North
American market, both parties believe that greater independence from Lithia
would enhance Pinewood.AI's value proposition to other North American dealer
groups. The current ownership structure of the Joint Venture, with Lithia
holding 51 per cent. equity ownership, has created a "competitor overhang"
situation whereby Pinewood.AI believes that other dealer groups are more
reluctant to adopt Pinewood.AI's technology as a result of greater competition
risk.
The North American opportunity has been a core part of Pinewood.AI's growth
strategy since its inception as a standalone business. The North American
automotive dealer software market is estimated to be worth over $6.5 billion,
of which the automotive dealership management systems ("DMS") market is
estimated to be approximately $2.4 billion. It is currently dominated by two
major competitors which hold approximately 70 per cent. of the US DMS market
share but Pinewood.AI believes that there is significant opportunity to
disrupt the US DMS market and displace old technology stacks and legacy
systems with its cloud-based software proposition. The Independent Directors
believe that independence from Lithia as a result of the Acquisition will
enable Pinewood.AI to enhance its value proposition to a greater number of
North American dealer groups and accelerate Pinewood.AI's ability to scale up
in the highly attractive and lucrative North American market.
The Independent Directors anticipate that Lithia will remain a supportive
partner to Pinewood.AI following the Acquisition, committing, under the DMS
Contract, to the full roll-out of the Pinewood Automotive Intelligence™
platform across all of its North American stores upon commercial readiness of
the product.
Following Completion, Bill Berman, Chief Executive Officer of Pinewood.AI,
Ollie Mann, Chief Financial Officer of Pinewood.AI and Dietmar Exler, Senior
Independent Non-executive Director of Pinewood.AI will remain in office as
directors and key individuals of the Joint Venture.
Principal Terms of the Acquisition
Under the current structure of the Joint Venture, the Company (through
Pinewood US Holdings LLC) holds 49 per cent. of the equity interest in the
Joint Venture whilst Lithia (through Lithia JVCo) holds the remaining 51 per
cent. equity interest (the "Majority JV Interests").
Pursuant to the Acquisition Agreement, the Company has agreed conditionally to
acquire the Majority JV Interests for a total acquisition consideration of
$76.5 million, which is supported by the valuation work performed by Kroll. A
copy of the valuation report prepared by Kroll (the "Valuation Report") is set
out at Appendix 7 to this announcement.
Kroll's Valuation Report estimates the current fair market value of the
Majority JV Interests based on the deployment of Pinewood.AI's DMS platform
and layered applications across Lithia's North American footprint (which is
the subject of the DMS Contract to be entered into between Pinewood.AI and
Lithia on completion of the Acquisition), recognising the commercial
difficulty of bringing independent third party dealers onto the Pinewood.AI
platform in North America whilst Lithia remains the majority shareholder in
the Joint Venture.
The Independent Directors believe that acquiring full control of the Joint
Venture will unlock compelling strategic and commercial opportunities across
North America. The Acquisition enhances Pinewood.AI's ability to deliver a
differentiated value proposition to other North American dealers, while also
addressing and mitigating the perceived "competitor overhang".
Shareholders should note that, based on the agreed purchase price, the implied
valuation of the Company's existing 49 per cent. interest in the Joint Venture
differs from the carrying value reported in the Company's most recent annual
report for the 11-month period ended 31 December 2024 (which reflects the
Company's cash contribution to the Joint Venture, net of its share of the
Joint Venture's losses during that period).
The consideration for the Acquisition is to be satisfied by the issue of
14,560,691 New Ordinary Shares to the Seller at a price of 386.5 pence per New
Ordinary Share (the "Issue Price"), being the volume-weighted average price of
the Company's ordinary shares (the "Ordinary Shares") during the thirty-day
period preceding the date of this announcement, following which the Company
shall assume 100 per cent. ownership in the Joint Venture.
Pursuant to the Acquisition Agreement, Lithia is subject to a lock-in
restricting the Seller from disposing of the New Ordinary Shares for a period
of two years following completion (subject to certain limited customary
exceptions, including with the consent of Pinewood.AI) and non-compete
restrictions on Lithia and the Seller for 12 months post-completion. The
lock-in and non-compete restrictions are customary and similar to the terms
agreed in the existing relationship agreement and joint venture agreement
between the Company and Lithia).
The Acquisition is subject to certain conditions, as described below and,
subject to satisfaction of those conditions, Completion is expected to occur
during Q3 2025.
The Transaction is, in the Independent Directors' opinion, in the best
interests of shareholders as a whole.
Financial Information
The gross assets of the Joint Venture as at 31 December 2024 were £19.6
million, with net assets of £19.5 million at the same date (both presented
under UK-adopted International Accounting Standards ("UK-adopted IFRS")). The
Pinewood.AI group (the "Group") recognised £9.6 million of the Joint
Venture's net assets as at 31 December 2024, being the Group's 49 per cent.
share, recognised as an interest in associate on the Group's consolidated
statement of financial position. For the 11 months ended 31 December 2024
("FY24"), under UK-adopted IFRS, the Joint Venture generated an operating loss
of £1.7 million, and a loss before tax of £1.0 million. The Group recognised
its 49 per cent. share of the loss before tax, amounting to £0.5m, as a share
of loss in associate in the Group's consolidated income statement for FY24.
This financial information has been extracted from the Joint Venture's income
statement from Note 5.2 of the Group's audited 31 December 2024 financial
statements.
Pro Forma Financial Information
On an unaudited pro forma basis, to illustrate the effect of the proposed
Acquisition on the Group's net assets for FY24 as if the proposed Acquisition
had completed on 31 December 2024, the Acquisition would have increased the
net assets of the Group by £8.3 million representing:
· net assets acquired of £9.9 million (after adjusting for the
investment in associate held in the balance sheet of the Group as at 31
December 2024 which solely relates to the Joint Venture); and
· a reduction in net assets of £1.6 million due to transaction costs
of £2.1 million being offset by a £0.5 million reduction in corporation tax
(as transaction costs are expected to be tax deductible for corporation tax
purposes).
An unaudited pro forma income statement has been prepared to illustrate the
effect of the proposed Acquisition on the Group's results for FY24 as if the
proposed Acquisition had occurred on 1 February 2024 being the beginning of
the period presented which shows a FY24 pro forma profit after tax of £3.5m
for the combined business.
The unaudited proforma net assets statement and income statement, and the
bases of preparation and assumptions applied are included as Appendix 2.
The unaudited pro forma financial information has been prepared for
illustrative purposes only. By its nature, the unaudited pro forma financial
information addresses a hypothetical situation and, therefore, does not
represent the enlarged group's actual financial position or results. It does
not purport to represent what the Group's financial position or results of
operations actually would have been if the Acquisition and other adjusted
items described had been completed on the dates indicated, nor does it purport
to represent the results of operations for any future period or financial
position of the Group at any future date.
Current Trading
Since 31 December 2024, Pinewood.AI's positive momentum has continued with the
announcement of five-year contracts with each of Global Auto Holdings Plc
("GAH") and Volkswagen Group Japan to implement the Pinewood Automotive
Intelligence™ platform across their dealerships, the acquisition of Seez,
and the successful completion of an equity fundraising, which was
significantly oversubscribed. Pinewood.AI is progressing with the integration
of Seez into the Group's systems.
Pinewood.AI remains focused on implementing the market-leading Pinewood
Automotive Intelligence™ system with new customers in the UK (Marshalls and
GAH in particular), driving growth in key international geographies, and
preparing for the roll-out of its products in North America. Pinewood.AI
remains on track to pilot the system in North America in the second half of
2025, before commencing full roll-out later in 2026. In addition, Pinewood.AI
expects to be ready to roll-out its new user experience later this year.
Trading in the current year has continued positively, and the directors of
Pinewood.AI (the "Directors") remain highly confident in the opportunities
ahead for Pinewood.AI.
In light of the Acquisition, the Directors intend to provide the market with
updated guidance for the financial year ending 31 December 2025 (which will be
on an underlying EBITDA basis) later this year, following completion of the
Acquisition. In addition, the Directors intend to issue a new medium-term
underlying EBITDA target for FY 2028) later this year, following completion of
the Acquisition, which the Company believes will significantly enhance its
value proposition to other North American dealer groups. It is expected that
the FY 2028 underlying EBITDA target would reflect the Company's medium-term
prospects, on account of the anticipated ramp-up of its North America
operations.
Rule 9 of the Takeover Code
The issue of the New Ordinary Shares to the Seller in connection with the
Acquisition would result in the Seller's and its concert parties' (together,
the "Concert Party") holding of Ordinary Shares increasing from approximately
22.1 per cent. of the Company's total issued share capital to approximately
32.0 per cent. of the Company's total issued share capital. This would
therefore trigger the obligation under Rule 9 of the City Code on Takeovers
and Mergers (the "Takeover Code") for the Concert Party to make a general
offer to acquire all of the Ordinary Shares not held by the Concert Party at
the Issue Price.
In addition, the percentage of Ordinary Shares in which the Concert Party is
interested could be increased subsequently as a result of the Company making
market purchases of Ordinary Shares, which could similarly result in the
Concert Party becoming obliged under Rule 9 and Rule 37 of the Takeover Code
to make an offer for the entire issued Ordinary Share capital of the Company.
In the event that the Company makes market purchases of Ordinary Shares up to
the maximum amount of its authority to do so, other than in relation to the
buyback of Ordinary Shares held by the Concert Party, based on the anticipated
issued share capital of the Company immediately following completion of the
Acquisition, the Concert Party would hold approximately 35.5 per cent. of the
issued share capital of the Company.
The requirement to make a mandatory offer under Rule 9 of the Takeover Code
can be waived by the Panel on Takeovers and Mergers (the "Panel"), if (amongst
other things) the shareholders of the Company (other than the Concert Party)
(the "Independent Shareholders") approve a waiver of the mandatory offer
provisions set out in Rule 9 of the Takeover Code (the "Waiver Resolutions").
The Panel has agreed, subject to the approval of Independent Shareholders of
the Waiver Resolutions on a poll at the general meeting (the "General
Meeting"), to waive any obligations that would otherwise arise on the Concert
Party to make a mandatory offer under Rule 9 of the Takeover Code, as further
detailed in the Circular (as defined below).
Annual General Meeting, General Meeting and Publication of the Circular
The Acquisition is conditional, amongst other things, on (i) the
aforementioned approval by the Independent Shareholders of the Waiver
Resolutions at the General Meeting and (ii) the approval by the shareholders
of the Company ("Shareholders") of an ordinary resolution to provide the
Directors with the authority to allot and issue the New Ordinary Shares
(together, the "Resolutions"). Therefore, if the Resolutions are not approved,
the Acquisition will not proceed.
To convene the General Meeting to propose the Resolutions, the Company has
published a Panel-approved circular to its shareholders (the "Circular"). The
Circular, which will be despatched to shareholders today, contains a notice of
General Meeting at which the Company will seek approval of the Resolutions.
Shareholders will also find enclosed with the Circular a form of proxy to use
in connection with the General Meeting.
The General Meeting will be held at the Radisson Hotel & Conference
Centre, London Heathrow, Meeting Room - Earhart, Building A, Bath Rd, Heathrow
Blvd, Sipson, West Drayton UB7 0DU on 30 June 2025 at 1.00 p.m., or as soon
thereafter as the annual general meeting of the Company, which is being held
at 12.45 p.m. at the same location on the same day (the "AGM"), has been
concluded or adjourned, if later. Notice of the AGM will be despatched to
Shareholders today.
Shareholders are reminded to review carefully the actions to be taken by them
in connection with the General Meeting, which are detailed in the Circular.
The procedures and timings for shareholders to vote on the Resolutions
proposed at the General Meeting are set out in the notes to the notice of the
General Meeting in the Circular and on the form of proxy.
A copy of the Circular and the Notice of the AGM will be submitted to the
National Storage Mechanism and will shortly be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism. The Circular and the
Notice of the AGM are also available for inspection on the Company's website.
UK Listing Rules
Significant transaction
Due to its size in relation to the Group, the Acquisition constitutes a
"significant transaction" for the purposes of the UK Listing Rules ("UKLRs")
made by the Financial Conduct Authority (the "FCA") and is therefore
notifiable in accordance with UKLR 7.3.1R and 7.3.2R.
Related party transaction
In addition, as a result of the Seller being a significant shareholder in
Pinewood.AI, the Seller is a "related party" of Pinewood.AI for the purposes
of the UKLRs and, as a result, the Acquisition constitutes a "related party
transaction" under UKLR 8R.
The Independent Directors consider the Acquisition to be fair and reasonable
as far as the shareholders of Pinewood.AI are concerned and the Independent
Directors have been so advised by Jefferies International Limited
("Jefferies") acting in its capacity as sponsor. In providing its advice to
the Independent Directors, Jefferies has taken into account the Independent
Directors' commercial assessments.
Further information relating to the Acquisition, as required by the UKLRs and
the Takeover Code, is set out in the Appendices to this announcement.
Market Abuse Regulation Statement
This announcement contains inside information.
The person responsible for arranging the release of this announcement on
behalf of the Company is Oliver Mann, Chief Financial Officer.
Enquiries:
Pinewood.AI InvestorRelations@Pinewood.AI
Bill Berman (Chief Executive)
Oliver Mann (Chief Financial Officer)
Jefferies International Limited (Financial Adviser, Sponsor and Joint +44 (0) 20 7029 8000
Corporate Broker)
Philip Noblet
Thomas Bective
Harry Spooner
Eleanor McDonald
Headland Consultancy (PR & Communications) +44 (0) 20 3805 4822
Henry Wallers
Jack Gault
IMPORTANT NOTICE
This announcement has been issued by and is the sole responsibility of the
Company. The information contained in this announcement is for background
purposes and does not purport to be full or complete.
No reliance may or should be placed by any person for any purpose whatsoever
on the information contained in this announcement or on its completeness,
accuracy or fairness. Recipients of this announcement should conduct their own
investigation, evaluation and analysis of the business, data and property
described in this announcement. This announcement does not constitute a
recommendation concerning any investor's decision or options with respect to
the Acquisition. The information in this announcement is subject to change.
This announcement is not intended to, and does not constitute or form part of,
any offer to sell or issue or any solicitation of an offer to purchase,
subscribe for, or otherwise acquire, any securities or a solicitation of any
vote or approval in any jurisdiction.
Jefferies International Limited ("Jefferies"), which is authorised and
regulated in the United Kingdom by the FCA, is acting solely for the Company
as financial adviser and sponsor and for no-one else in connection with the
Acquisition and the matters set out in this announcement. Jefferies will not
regard any other person (whether or not a recipient of this announcement) as
its client in relation to the Acquisition and the matters set out in this
announcement and will not be responsible to anyone other than the Company for
providing the protections afforded to its clients or for providing advice to
any other person in relation to the Acquisition, the content of this
announcement or any other transaction, arrangement or matter described in this
announcement.
Apart from the responsibilities and liabilities, if any, which may be imposed
by the Financial Services and Markets Act 2000, as amended, or the regulatory
regime established thereunder, neither Jefferies nor any of its affiliates,
directors, officers, employees or advisers accepts any responsibility or
liability whatsoever for or makes any representation or warranty, express or
implied, in respect of the contents of this announcement including its
accuracy, completeness or verification or for any other statement made or
purported to be made by it, or on its behalf, the Company, the Directors or
any other person in connection with the Company, the Transaction or any matter
described in this announcement and nothing in this announcement is or shall be
relied upon as a promise or representation in this respect, whether as to the
past or future. Each of Jefferies and its affiliates, directors, officers,
employees and advisers accordingly disclaims, to the fullest extent permitted
by law, all and any responsibility or liability whatsoever, whether arising in
tort, contract or otherwise (save as referred to above) which it might
otherwise have in respect of this announcement or any such statement.
Neither the contents of the Company's website nor any website accessible by
hyperlinks on the Company's website is incorporated in, or forms part of, this
announcement.
No person has been authorised to give any information or to make any
representations other than those contained in this announcement and, if given
or made, such announcements must not be relied on as having been authorised by
the Company, Jefferies or any of their respective affiliates. Subject to the
UKLR, the Prospectus Regulation Rules, the Disclosure Guidance and
Transparency Rules and the Market Abuse Regulation, the issue of this
announcement and any subsequent announcement shall not, in any circumstances,
create any implication that there has been no change in the affairs of the
Pinewood.AI since the date of this announcement or that the information
contained in it is correct as at any subsequent date.
Notice to Overseas Investors
This announcement may not be distributed, directly or indirectly, in or into
any jurisdiction where to do so might constitute a breach of applicable law.
This announcement is for information purposes only and does not constitute or
form part of any offer or invitation to buy, subscribe for, or sell Ordinary
Shares in the United States or any other jurisdiction in which such offer or
solicitation is unlawful. This announcement is intended only to comply with
the Company's obligations under applicable disclosure rules and is not
intended to constitute marketing or promotion of the Ordinary Shares in the
United States or to U.S. persons as such term is defined in Regulation S
promulgated under the United States Securities Act of 1933, as amended (the
"US Securities Act").
The Ordinary Shares have not been and will not be registered under the US
Securities Act or under the laws of any state or other jurisdiction of the
United States, and therefore may not be offered or sold, directly or
indirectly, in or into the United States, except pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
US Securities Act. No public offering of securities is being made in the
United States. The Transaction relates to the securities of an English company
and is subject to UK procedural and disclosure requirements that are different
from those of the United States. Any financial statements or other financial
information included in this document may have been prepared in accordance
with non-US accounting standards that may not be comparable to the financial
statements of US companies or companies whose financial statements are
prepared in accordance with generally accepted accounting principles in the
United States. It may be difficult for US holders of Ordinary Shares to
enforce their rights and any claims they may have arising under the US federal
securities laws in connection with the Transaction, since the Company is
located in a country other than the United States, and some or all of its
officers and directors may be residents of countries other than the United
States. US holders of Ordinary Shares may not be able to sue the Company or
its officers and directors in a non-US court for violations of the US
securities laws. Further, it may be difficult to compel the Company and its
affiliates to subject themselves to the jurisdiction or judgment of a US
court.
The securities described in this announcement have not been, and will not be,
registered or qualified for sale under the applicable laws of Australia,
Canada, Japan, the Republic of South Africa or New Zealand, and may not be
offered or sold to any national, resident or citizen of Australia, Canada,
Japan, the Republic of South Africa or New Zealand, or of any other
jurisdiction where to do so might constitute a breach of applicable law
(collectively and together with the United States, the "Excluded
Territories"). No public offering of securities is being made in the Excluded
Territories.
The release, publication or distribution of this announcement, the Ordinary
Shares in or into jurisdictions other than the United Kingdom may be
restricted by laws and/or regulations of those jurisdictions. Persons who are
not resident in the United Kingdom or who are subject to other jurisdictions
should inform themselves of, and should observe, any applicable requirements.
Any failure to comply with these requirements may constitute a violation of
the securities laws of any such jurisdiction. Unless otherwise determined by
the Company, and permitted by applicable law and regulation, the Transaction
will not be implemented and documentation relating to the Transaction shall
not be made available, directly or indirectly, in, into or from an Excluded
Territory where to do so would violate the laws of that jurisdiction.
Accordingly, copies of this announcement are not being, and must not be,
directly or indirectly, mailed or otherwise forwarded, distributed or sent in,
into or from any Excluded Territory and persons with access to this
announcement and any documents relating to the Acquisition (including
custodians, nominees and trustees) must not mail or otherwise forward,
distribute or send them in, into or from any Excluded Territory.
This announcement has been prepared for the purpose of complying with English
law and applicable regulations and the information disclosed may not be the
same as that which would have been disclosed if this announcement had been
prepared in accordance with the laws of jurisdictions outside of England.
Except in the United Kingdom, no action has been taken to permit the
distribution of this announcement in any jurisdiction where any action would
be required for such purpose. It is the responsibility of each person into
whose possession this announcement comes to satisfy themselves as to the full
observance of the laws and regulations of the relevant jurisdiction in
connection with the distribution of this announcement and the receipt of the
Ordinary Shares and to obtain any governmental, exchange control or other
consents which may be required, comply with other formalities which are
required to be observed and pay any issue, transfer or other taxes due in such
jurisdiction. To the fullest extent permitted by applicable law, Pinewood.AI,
the Directors, the Pinewood.AI group and Jefferies and all other persons
involved in the Transaction disclaim any responsibility or liability for the
failure to satisfy any such laws, regulations or requirements by any person.
Notice to all Shareholders
This announcement is not a prospectus and it does not constitute or form part
of any offer or invitation to purchase, acquire, subscribe for, sell, dispose
of or issue, or any solicitation of any offer to sell, dispose of, purchase,
acquire or subscribe for, any security. The Company intends to publish the
Prospectus, once approved by the FCA, in connection with the admission of the
New Ordinary Shares to the equity shares (commercial companies) category of
the Official List and to trading on the Main Market ("Admission") in due
course. Accordingly, this announcement has not been approved by or filed with
the FCA or the London Stock Exchange. This announcement should be read in
conjunction with the Circular and the Prospectus, both of which will be made
available on the Company's website at www.pinewood.ai (http://www.pinewood.ai)
/investors on or around the date of this announcement.
This announcement contains forward-looking statements. These statements relate
to the Pinewood.AI group's future prospects, developments and business
strategies. Forward-looking statements are identified by their use of phrases
such as "potential", "estimate", "expect", "may", "will", or the negative of
those, variations or comparable expressions, including references to
assumptions. The forward-looking statements in this announcement are based on
current expectations and are subject to risks and uncertainties that could
cause actual results to differ materially from those expressed or implied by
those statements. No assurance can be given that this information will prove
to be correct and such forward-looking statements should not be relied upon.
These forward-looking statements speak only as at the date of this
announcement.
No statement in this announcement is intended as a profit forecast or estimate
for any period.
No statement in this announcement should be interpreted to mean that earnings,
earnings per share or income, cash flow from operations or free cash flow for
the Pinewood.AI group, for the current or future financial years would
necessarily match or exceed the historical published earnings, earnings per
share or income, cash flow from operations or free cash flow for the
Pinewood.AI group.
APPENDIX 1
KEY FINANCIAL INFORMATION RELATING TO THE ACQUISITION
To assist with the assessment of the valuation of the Majority JV Interests,
below is a summary of the key financials.
Sources of Financial Information
In this announcement unless otherwise stated:
(i) financial information relating to Pinewood.AI has been extracted,
without material adjustment, from the audited financial statements for the
11-month period ended 31 December 2024 prepared in accordance with UK-adopted
International Accounting Standards; and
(ii) where information has been sourced from a third party, Pinewood.AI
confirms that the information has been accurately reproduced and, as far as
Pinewood.AI is aware and able to ascertain from information published by that
third party, no facts have been omitted which would render the reproduced
information inaccurate of misleading. Where third party information has been
used, the source of such information has been identified wherever it appears
in this announcement.
APPENDIX 2
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Basis of preparation
The unaudited pro forma financial information (the "Unaudited Pro Forma
Financial Information") of the Group has been prepared to illustrate the
effect of the Acquisition on:
• the unaudited pro forma income statement of the Group for the
11-month period ended 31 December 2024, as if the Acquisition had taken place
on 1 February 2024; and
• the unaudited pro forma net assets of the Group as at 31
December 2024, as if the Acquisition had taken place on that date.
The Unaudited Pro Forma Financial Information has been prepared for
illustrative purposes only. The hypothetical financial position or results
included in the Unaudited Pro Forma Financial Information may differ from the
Group's actual financial position or results. It does not purport to represent
what the Group's financial position or results of operations actually would
have been if the Acquisition and other adjusted items described in this
section had been completed on the dates indicated, nor does it purport to
represent the results of operations for any future period or financial
position of the Group at any future date. The Unaudited Pro Forma Financial
Information has been prepared on the basis set out in the notes below and has
been prepared in a manner consistent with the accounting policies that were
adopted by the Company in its financial statements for the period ended 31
December 2024 and in accordance with the requirements of Sections 1 and 2 of
Annex 20 of the PR Regulation.
The Unaudited Pro Forma Financial Information does not constitute statutory
accounts within the meaning of Section 434 of the Companies Act 2006.
Unaudited Pro Forma Income Statement
For the 11-month period ended 31 December 2024 Group Joint Venture Adjustments Pro Forma Income Statement
£m Note 1 Note 2 Note 3 Note 4 Note 5
Revenue 31.2 - - - 31.2
Cost of sales (3.0) - - (3.0)
Gross profit 28.2 - - - 28.2
Administrative expenses (23.9) (1.7) (2.1) (27.7)
Operating profit/(loss) 4.3 (1.7) - (2.1) 0.5
Finance expense (0.3) - - (0.3)
Finance income 4.7 0.7 - 5.4
Share of loss in associate (0.5) - 0.5 - -
Profit/(loss) before taxation 8.2 (1.0) 0.5 (2.1) 5.6
Income tax expense (2.5) - (0.1) 0.5 (2.1)
Profit/(loss) for the period 5.7 (1.0) 0.4 (1.6) 3.5
Notes to the Unaudited Pro Forma Income Statement:
1) The income statement of the Group for the 11 months ended 31 December
2024 has been extracted without adjustment from the Group's audited 31
December 2024 financial statements.
2) The income statement of the Joint Venture for the 11 months ended 31
December 2024 has been extracted from note 5.2 to the Group's audited 31
December 2024 financial statements with specific categorisation allocations
extracted from the unaudited management accounts of the Joint Venture for the
period to 31 December 2024.
3) The adjustment removes the share of loss in associate in the income
statement of the Group for the 11 months ended 31 December 2024 which solely
relates to the Joint Venture. This adjustment will have a continuing impact on
the Group as the Joint Venture will not be an associate going forward.
4) The total estimated costs and expenses of the Acquisition payable by
the Company are £2.1 million (exclusive of VAT). As these costs and expenses
are one-off, they are not expected to have a continuing impact on the Group.
These costs are expected to be deductible for corporation tax purposes.
5) The pro forma income statement does not take account of events that
have occurred in the Group or the Joint Venture after 31 December 2024.
Unaudited Pro Forma Statement of Net Assets
As at 31 December 2024 Group Joint Venture Adjustments Pro Forma Net Assets
£m Note 1 Note 2 Note 3 Note 4 Note 5
Note 6
Non-current assets
Property, plant and equipment 1.7 - - - 1.7
Goodwill 0.3 - - - 0.3
Investment in associate 9.6 - (9.6) - -
Other investments 3.2 - - - 3.2
Other intangible assets 16.3 0.8 - - 17.1
Total non-current assets 31.1 0.8 (9.6) - 22.3
Current assets
Trade and other receivables 21.4 - - - 21.4
Cash and cash equivalents 9.3 18.8 - (2.1) 26.0
Total current assets 30.7 18.8 - (2.1) 47.4
Total assets 61.8 19.6 (9.6) (2.1) 69.7
Current liabilities
Lease liabilities (0.7) - - - (0.7)
Trade and other payables (11.0) (0.1) - - (11.1)
Deferred income (7.6) - - - (7.6)
Current tax payable (0.1) - - 0.5 0.4
Total current liabilities (19.4) (0.1) - 0.5 (19.0)
Non-current liabilities
Interest bearing loans and borrowings (0.2) - - - (0.2)
Lease liabilities (0.7) - - - (0.7)
Deferred tax (2.5) - - - (2.5)
Total non-current liabilities (3.4) - - - (3.4)
Total liabilities (22.8) (0.1) - 0.5 (22.4)
Net assets 39.0 19.5 (9.6) (1.6) 47.3
Notes to the Unaudited Pro Forma Statement of Net Assets:
1) The net assets of the Group as at 31 December 2024 have been
extracted without adjustment from the Group's audited 31 December 2024
financial statements.
2) The net assets of the Joint Venture as at 31 December 2024 have been
extracted from note 5.2 to the Group's audited 31 December 2024 financial
statements with specific categorisation allocations extracted from the
unaudited management accounts of the Joint Venture for the period to 31
December 2024.
3) The adjustment removes the investment in associate held in the
balance sheet of the Group as at 31 December 2024 which solely relates to the
Joint Venture.
4) The total estimated costs and expenses of the Acquisition payable by
the Company are £2.1 million (exclusive of VAT), which are expected to be
deductible for corporation tax purposes.
5) On completion of the transaction, it is expected that acquisition
accounting methodology will be followed. In the unaudited pro forma statement
of net assets, no adjustment has been made to the fair values of the
individual net assets of the Joint Venture to reflect any remeasurement to
fair value. The fair value adjustments, when finalised, may be material.
Furthermore, no adjustment has been made for the fair value of the
consideration of $76.5 million which is being satisfied by the issue of the
New Ordinary Shares at a price of 386.5 pence per New Ordinary Share to the
Seller.
6) The pro forma statement of net assets does not take account of events
that have occurred in the Group or the Joint Venture after 31 December 2024.
APPENDIX 3
MATERIAL CONTRACTS
1. MATERIAL CONTRACTS OF THE Pinewood.AI GROUP
The following contracts, not being contracts entered
into in the ordinary course, have been entered into by the Company or other
members of the Group in the two years prior to the date of this announcement,
or are subsisting agreements which the Company believes Shareholders would
reasonably require for the purpose of making a properly informed assessment of
the Acquisition and its impact on the Company:
1.1.1 Acquisition Agreement
The Acquisition Agreement provides for the sale of a 51 per cent. interest the
Joint Venture from the Seller (following a pre-sale reorganisation whereby
Lithia JVCo will transfer the 51 per cent. interest to the Seller) to the
Company, for a total consideration of $76.5 million to be satisfied by the
issue of the New Ordinary Shares to the Seller.
Completion is conditional upon (i) the Financial Conduct Authority (the "FCA")
approval and publication of the Prospectus, (ii) approval by the Shareholders
of the Resolutions, (iii) completion of the abovementioned pre-sale
reorganisation between the Seller and Lithia JVCo (iv) all waiting periods
applicable to the Acquisition under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 having expired or been terminated and (v) Admission
(the "Conditions"). Completion under the Acquisition Agreement will occur
automatically upon Admission. The Acquisition Agreement will terminate if one
or more of the Conditions are not satisfied prior to 3 September 2025.
Lithia may terminate the Acquisition Agreement in the event that any of the
following occur:
a) the Circular is not despatched to the Company's shareholders by 13 June
2025;
b) the Circular does not include the recommendation from the Independent
Directors to Company's shareholders to vote in favour of the Resolutions (or
such recommendation is subsequently withdrawn);
c) if the FCA does not provide approval to the Prospectus or the
Prospectus is not published in accordance with the Prospectus Regulation Rules
by 30 June 2025; or
d) if the General Meeting has not been held (and the Resolutions put to
Shareholders) by 7 July 2025.
The Acquisition Agreement contains certain restrictions on Lithia and the
Seller between the date of the Acquisition Agreement and completion to ensure
that the Joint Venture does not depart from its ordinary course of business
during that time. The Acquisition Agreement includes certain warranties from
all parties relating to their capacity to enter into the Acquisition
Agreement, title warranties from Lithia JVCo and the Seller in relation to its
51 per cent. interest in the Joint Venture, a lock-in restricting the Seller
from disposing of the New Ordinary Shares for a period of two years following
completion (subject to certain limited customary exceptions, including with
the consent of Pinewood.AI) and certain non-compete restrictions on Lithia and
the Seller for 12 months post-completion. The lock-in and non-compete
restrictions are customary and similar in nature to the terms agreed in the
existing relationship agreement and joint venture agreement between the
Company and Lithia (and their respective subsidiaries).
The Acquisition Agreement is governed by English law and subject to the
exclusive jurisdiction of the courts of England and Wales.
1.1.2 2025 Sponsor Agreement
On 6 June 2025, the Company entered into a sponsor agreement with Jefferies
pursuant to which the Company appointed Jefferies as sponsor for the purposes
of the Acquisition and Admission and to carry out the duties of a sponsor as
provided by Chapter 24 of the UKLRs.
Under the terms of that agreement, the Company has given certain customary
representations and warranties, agreed to comply with certain customary
undertakings and gave certain customary indemnities to Jefferies. The
liabilities under those warranties, undertakings and indemnities are unlimited
as to time and amount. Jefferies is permitted by notice to the Company
terminate the agreement in certain customary limited circumstances.
1.1.3 Jefferies Engagement Letter
On 2 June 2025, the Company entered into an engagement letter with Jefferies
pursuant to which the Company appointed Jefferies to provide certain services
in connection with the Acquisition and to carry out the duties of a sponsor as
provided by the UKLRs.
Under the terms of that agreement, the Company has agreed to comply with
certain customary undertakings and gave certain customary indemnities to
Jefferies. The liabilities under those undertakings and indemnities are
unlimited as to time and amount. Jefferies is permitted by notice to the
Company terminate the agreement in certain customary limited circumstances.
1.1.4 Warrant Instruments
On 13 February 2025, the Company entered into an ordinary course five year
dealer management systems contract with GAH for the implementation by GAH of
the Pinewood Automotive Intelligence™ system into all of its owned
dealerships across the UK, North America and Scandinavia. In connection
with that contract, the Company entered into three warrant instruments
(together, the "Warrant Instruments"), pursuant to which the Company has
issued to Kuldeep Billan, being an affiliate of GAH, warrants over a maximum
of 6,098,093 new Ordinary Shares (comprising approximately 7 per cent. of the
Company's issued share capital as at 13 February 2025) which are exercisable
at a strike price of 330.0 pence per Ordinary Share, in certain tranches,
subject in each case to the satisfactory completion of the installation of the
Pinewood Automotive Intelligence™ platform into the entirety of each
relevant geography. The Warrant Instruments in respect of the European and
North American installations by GAH each relate to warrants over 871,156
Ordinary Shares. The Warrant Instrument in respect of the UK installation by
GAH relates to warrants over 4,355,781 Ordinary Shares.
The subscription rights in respect of the warrants issued pursuant to the
Warrant Instruments may be exercised on a cashless basis and are subject to
adjustment in the event of the occurrence of customary adjustment events. All
outstanding warrants may be exercised in the event of a takeover of the
Company, whether implemented by way of a contractual offer or a statutory
scheme of arrangement.
1.1.5 Seez Acquisition Agreement
On 20 February 2025, the Company entered into a conditional agreement to
acquire the shares in Seez not already owned by the Company for total
consideration of USD $42,000,000, which was satisfied through a combination of
cash and Ordinary Shares (the "Seez Acquisition Agreement"). The Seez
Acquisition Agreement was completed on 4 March 2025.
1.1.6 Placing Agreement
On 20 February 2025, in connection with the acquisition of Seez, the Company
entered into a placing agreement with Jefferies and Joh. Berenberg, Gossler
& Co. KG, London Branch (together, the "Banks") pursuant to which the
Banks agreed to use reasonable endeavours to procure subscribers for new
Ordinary Shares (the "Placing Agreement"). The Banks were paid commissions
based on the aggregate value of Ordinary Shares issued to subscribers procured
by them pursuant to the Placing Agreement. Under the terms of the Placing
Agreement, the Company gave certain warranties and indemnities to the Banks
which were customary for an agreement of this nature. The liabilities under
those warranties, undertakings and indemnities are unlimited as to time and
amount.
1.1.7 Seez Warranty Deed
On 20 February 2025, the Company entered into a warranty deed (the "Warranty
Deed") pursuant to which the principal shareholder of Seez provided certain
warranties and indemnities to the Company in connection with the acquisition
of Seez. The warranties contained in the Warranty Deed are backed by a
warranty and indemnity insurance policy.
1.1.8 Seez Subscription Letters
In connection with the funding of the cash consideration payable by the
Company pursuant to the Seez Acquisition Agreement, on 20 February 2025, Brian
Small, Rida Andrew Kabrit and Augmented Reality Concepts, LLC entered into
agreements pursuant to which they each agreed to subscribe for Ordinary Shares
in aggregate sums equal to £20,000, $600,000 and £1,191,180, respectively,
at the issue price determined pursuant to the Placing Agreement. Each
subscription was subject to certain customary conditions, and became
unconditional on 4 March 2025.
1.1.9 Seez Lock-In Deeds
On 4 March 2025, the recipients of Ordinary Shares as consideration pursuant
to the Seez Acquisition Agreement, being Rida Andrew Kabrit, Karim Corm, Tarek
Kabrit and Zain Fares (the "Seez Locked-In Parties"), undertook, subject to
certain customary exceptions, not to directly or indirectly, sell, transfer,
mortgage, charge, encumber, swap, pledge, grant options over, transmit,
distribute, gift, assign, convey or dispose of any legal or beneficial
interest in any of such Ordinary Shares for a period of 6 months' from 4 March
2025 pursuant to four lock in deeds between the Company and the Seez Locked-In
Parties (the "Seez Lock-In Deeds"). The Seez Lock-In Deeds provide for certain
limited exceptions to the lock-in undertaking given therein, which include:
(i) with the prior written consent of the Company, which
shall not be unreasonably withheld;
(ii) transferring or otherwise disposing of Ordinary Shares
in accordance with any order made by a court of competent jurisdiction as
required by law or regulation;
(iii) accepting a recommended offer for the whole of the
issued equity share capital of the Company (other than any equity share
capital held by or committed to the offeror and/or persons acting in concert
with the offeror) made in accordance with the Takeover Code on or in executing
and delivering an irrevocable undertaking to accept such an offer;
(iv) pursuant to any compromise or arrangement under Section
896 of the Companies Act providing for the acquisition by any person (or any
group of persons acting in concert, as such expression is defined in the
Takeover Code) of 50 per cent. or more of the Ordinary Shares and which
compromise or arrangement has been sanctioned by the courts;
(v) in connection with any scheme of reconstruction under
section 110 of the Insolvency Act 1986 in relation to the Company;
(vi) the disposal of rights to Ordinary Shares issued by the
Company by way of a rights issue to fund the take-up of the balance of such
rights; and
(vii) selling or otherwise disposing of Ordinary Shares pursuant
to any offer by the Company to purchase its own Ordinary Shares which is made
on identical terms of all holders of Ordinary Shares in the Company.
1.1.10 Joint Venture Agreement
On 1 February 2024, the Company entered into an amended and restated limited
liability company agreement with Pinewood US Holdings LLC, the Seller, the
Joint Venture and Lithia for the principal purpose of co-developing and
commercialising in the United States of America and Canada a North American
version of the dealership management system (the "Joint Venture Agreement").
The Seller holds 51 per cent. of the equity interests in the Joint Venture and
Pinewood US Holdings LLC holds the remaining 49 per cent. of the equity
interests in the Joint Venture.
The Joint Venture Agreement provides that:
(i) the board of the Joint Venture shall consist of a
maximum of four managers, of whom two shall be appointed by Lithia and two
shall be appointed by the Company, and that the member holding a majority of
the equity interests in the Joint Venture, being Lithia JVCo as at the date of
this announcement, has the right to appoint the chairperson of the board of
the Joint Venture;
(ii) the quorum for meetings of managers of the Joint
Venture is to be one manager appointed by each of the Company and Lithia, with
resolutions being passed by simple majority, and the chairperson having a
casting vote; and
(iii) a number of strategic decisions are reserved for
shareholders, and require the approval of members holding at least 85 per
cent. of membership interests.
(iv) the Joint Venture Agreement contains restrictions on
dilution of Lithia and the Company's interest, and the transfer of such
interests, subject to certain exceptions for a period of 5 years from 1
February 2024. Following such initial period, the Joint Venture Agreement
includes customary exit provisions, including drag and tag rights.
(v) the Joint Venture Agreement is governed by the laws of
England and shall be subject to the exclusive jurisdiction of the courts of
England, provided that matters under the Joint Venture Agreement governed by
the Delaware Act are governed by the laws of Delaware.
1.1.11 Pendragon Disposal Agreement
On 18 September 2023, the Company entered into an agreement with Pendragon
Group Holdings Limited and the Seller to sell Pendragon NewCo 2 Limited
("NewCo 2") and its subsidiary undertakings (the "Disposal Group") to the
Seller (the "Pendragon Disposal Agreement").
Consideration
The gross aggregate consideration received by the Company pursuant to the
Pendragon Disposal Agreement was £367 million (subject to certain financial
adjustments).
Warranties and indemnities
The Pendragon Disposal Agreement contains warranties and a tax covenant
(subject to customary limitations including a maximum financial liability cap
of £1.00) granted by the Company to the Seller that are customary for this
type of transaction. The aggregate liability of the Company for all other
claims under the Pendragon Disposal Agreement shall not exceed an amount equal
to 25 per cent. of the consideration thereunder.
Non-compete and non-solicit
The Company and the Seller have given customary non-solicit and non-compete
undertakings to the other in relation to the business carried out by the
Company (in the case of the Seller) or the Seller (in the case of the Company)
and their respective customers, senior employees and suppliers. The
undertakings apply for a period of three years and the parties shall procure
that their respective group companies also comply with these provisions.
Customary carve-outs apply to those undertakings.
Governing law and jurisdiction
The Pendragon Disposal Agreement is governed by and construed in accordance
with the laws of England and Wales and the courts of England and Wales have
exclusive jurisdiction.
1.1.12 Relationship Agreement
On 31 January 2024, the Company, Project Puma Funding Limited ("Puma") and the
Seller, a wholly owned subsidiary of Lithia, entered into a subscription,
transfer and relationship agreement (the "Relationship Agreement"), pursuant
to which, subject to the satisfaction of certain conditions, the Seller agreed
to subscribe for 279,388,880 ordinary shares of 5 pence each in the capital of
the Company at an issue price of approximately 10.74 pence per share.
Pursuant to the Relationship Agreement, the Seller undertook, subject to
certain customary exceptions, not to directly or indirectly, sell, transfer,
mortgage, charge, encumber, swap, pledge, grant options over, transmit,
distribute, gift, assign, convey or dispose of any legal or beneficial
interest in any of such Ordinary Shares for a period of two years from
admission of the Ordinary Shares to be subscribed for pursuant to the
Relationship Agreement. The lock-in undertaking is subject to certain
customary limited exceptions, including:
(i) with the prior written consent of the Company;
(ii) transferring or otherwise disposing of Ordinary Shares
in accordance with any order made by a court of competent jurisdiction as
required by law or regulation;
(iii) accepting a recommended offer (in accordance with the
Takeover Code) made to shareholders of the Company (or to all such
shareholders other than the relevant offeror and/or any persons acting in
concert (as such term is defined in the Takeover Code) with such offeror) to
acquire all the issued Ordinary Shares (other than any Ordinary Shares already
owned by the relevant offeror and any person acting in concert with such
offeror) or to the execution and delivery of an irrevocable undertaking to
accept such offer;
(iv) selling or otherwise disposing of Ordinary Shares
pursuant to any offer by the Company to purchase its own shares which is made
on identical terms to all holders of shares in the Company and otherwise
complies with the Companies Act;
(v) transferring or disposing of shares pursuant to a
compromise or arrangement between the Company and its creditors or any class
of them or between the Company and its members or any class of them which is
agreed to by the creditors or members and (where required) sanctioned by the
court under the Companies Act;
(vi) transferring Ordinary Shares pursuant to a compromise or
arrangement pursuant to a scheme of arrangement under Part 26 of the Companies
Act providing for the acquisition by any person (or group of persons acting in
concert, as such expression is defined in the Takeover Code) of 50 per cent.
or more of the ordinary share capital of the Company and which compromise or
arrangement has been sanctioned by the court;
(vii) disposing of Ordinary Shares pursuant to a scheme of
reconstruction under section 110 of the Insolvency Act 1986 in relation to the
Company; and
(viii) taking up any Ordinary Shares or other rights granted in
respect of a rights issue or other pre-emptive share offering by the Company.
The Company and Puma agreed to give certain warranties to Lithia which were
customary for an agreement of this nature. The liabilities under those
warranties are unlimited as to time and amount.
The principal purpose of the Relationship Agreement is to ensure that the
Company can carry on as an independent business. The Relationship Agreement
contains, among others, undertakings from the Seller, on behalf of itself and
its associates, that: (i) transactions and arrangements with it (and/or any of
its associates) will be conducted at arm's length and on normal commercial
terms; (ii) neither it nor any of its associates will take any action that
would have the effect of preventing the Company from complying with its
obligations under the UKLRs, and (iii) neither it nor any of its associates
will take any action that would have the effect of preventing the Company from
managing their affairs in accordance with the principles of good corporate
governance set out in the UK Corporate Governance Code.
Under the terms of the Relationship Agreement, the Seller has the right to
nominate up to two directors to the board of Pinewood.AI for so long as the
Seller is entitled to exercise 10 per cent. or more of the voting rights
attaching to the Ordinary Shares. The Relationship Agreement regulates the
appointment and removal of any such directors. The Seller has exercised this
right and appointed Christopher Holzshu and George Hines as directors of the
Company.
1.1.13 Reverse Transitional Services Agreement
Pursuant to the Pendragon Disposal Agreement, on 31 January 2024, the Company
entered into a reverse transitional services agreement with NewCo 2, to govern
the separation and transition of several services and functions required by
the Group from the Disposal Group (the "rTSA").
Pursuant to the terms of the rTSA, NewCo 2 agreed to provide, or procure the
provision of, certain transitional services including in relation to (but not
limited to) legal, utilities, accounting, taxation, expenses, payroll,
employee benefits and IT (the "TSA Services") to the Group on the terms of the
rTSA, and the parties agreed to co-operate to achieve the separation of the
Group from the Disposal Group and migration of the Group from the TSA
Services. The rTSA had an initial term of 12 months from completion of the
Disposal, which can be extended where the parties, negotiating in good faith,
so agree. The rTSA contains customary termination provisions, including the
ability for the Company to terminate any TSA Service before the end of the
term of 45 days' notice.
The Company agreed to pay a total annual service charge of £300,000, plus
certain additional recharges as applicable which are to be paid monthly in
arrears. The parties to the rTSA each gave certain warranties to the other
which were customary for an agreement of this nature, and the total aggregate
liability for each party under such warranties is limited to £300,000.
1.1.14 Intellectual Property Agreement
On 31 January 2024, the Company entered into an IP assignment agreement with
Pendragon Management Services Limited (the "IP Assignment Agreement").
Pursuant to the IP Assignment Agreement, the Company agreed to assign to
Pendragon Management Services Limited certain trade marks and domain names
together with all trading names and business names in connection with the
Disposal for a consideration of £1.00. Such trade marks, domain names and
associated trading names are relevant to the Disposal Group's business only
and were not relevant to or required by the Group following completion of the
Disposal.
1.1.15 Licence and Framework Services Agreement
On 1 February 2024, Pinewood.AI and the Joint Venture entered into a licence
and framework services agreement (the "Licence and Framework Services
Agreement") for the Joint Venture to commercialise software owned by
Pinewood.AI in the United States of America and Canada. Pursuant to the
Licence and Framework Services Agreement, the Joint Venture granted the
Company a perpetual, royal-free, non-transferable, non-sub-licensable,
exclusive licence to edit, market, promote, sell, implement, configure and
support the software and deliverables.
The Licence and Framework Services Agreement is intended to operate as a
framework under which the parties will document a product development plan and
individual statements of work, setting out any software development activities
required to be undertaken by Pinewood.AI to facilitate the development,
customisation and sale of the software in the North America. The parties will
also document a business plan and brand strategy detailing the marketing and
sales activity to be undertaken by Joint Venture in respect of the software in
the North America. Additionally, the parties agreed to put in place an
operating model which details the support services Pinewood.AI will supply in
connection with the software. The fees and charges payable in connection with
the Licence and Framework Services Agreement are to be set out in individual
scopes of work intended to be issued in accordance with such agreement.
Pursuant to the Licence and Framework Services Agreement the parties agreed to
enter into an escrow agreement pursuant to which the source code for the
software developed by the Joint Venture will be deposited in escrow for the
benefit of Joint Venture.
The Licence and Framework Services Agreement shall remain in effect unless
terminated by either party on prior written notice in accordance with its
terms. Either party may terminate the Licence and Framework Services
Agreement, or any statement of work pursuant to the Licence and Framework
Services Agreement, immediately on written notice in the event of (in respect
of the other party) an insolvency event. Following the release of the source
code to the Joint Venture, the Joint Venture may terminate the Licence and
Framework Services Agreement or any statement of work pursuant to it by giving
written notice to Pinewood.AI.
The maximum aggregate liability of each party under the Licence and Framework
Services Agreement will be limited to £20 million per contract year, although
each parties liability for death/personal injury, fraud or fraudulent
misrepresentation, wilful misconduct or abandonment, liability which cannot be
limited by law and intellectual property rights infringement are unlimited.
1.1.16 DMS Escrow Software Agreement
On 1 February 2024, Pinewood.AI, the Joint Venture and NCC Group Escrow
Limited (the "Escrow Agent") entered into the escrow software agreement
required to be entered into pursuant to the Licence and Framework Services
Agreement pursuant to which Pinewood.AI has agreed to deposit certain
confidential information and intellectual property of the Company with the
Escrow Agent for release in certain limited circumstances.
1.1.17 Deed of Admission and Amendment
On 31 October 2023, the Company entered into a deed of admission and amendment
to the Pendragon Group Pension Scheme ("Scheme") with Pendragon Group Pension
Trustees Limited (the "Trustee") and NewCo 2 (the "Deed of Admission and
Amendment"). The Deed of Admission and Amendment is supplemental to a
Definitive Deed and Rules dated 24 September 2024 made between the Company and
the Trustee (the "Trust Deed") to allow for the liabilities of the Company to
be formally apportioned to NewCo 2 for the purposes of Regulation 6E of the
Occupational Pension Schemes (Employer Debt) Regulations 2005.
1.1.18 Flexible Apportionment Agreement
On 13 November 2023, the Company entered into a flexible apportionment
arrangement to the Scheme with Trustee and New Employer. Scheme is governed by
the Trust Deed and is currently a frozen scheme with effect from 30 November
2023. The Company, Trustee and NewCo 2 agreed that, from the date of
completion of the Disposal:
(i) NewCo 2 substituted the Company as "Principal
Employer" of the Scheme;
(ii) NewCo 2 assumed recallabilities for the liabilities;
and
(iii) the Company ceases to be an employer and a former
employer in relation to the Scheme and is discharged from any further
liability under the Scheme.
1.1.19 2023 Sponsor Agreement
On 20 September 2023, the Company entered into a sponsor agreement with
Jefferies pursuant to which the Company appointed Jefferies as sponsor for the
purposes of the Disposal and to carry out the duties of a sponsor as provided
by Chapter 24 of the UKLRs (the "2023 Sponsor Agreement").
Under the terms of the 2023 Sponsor Agreement, the Company gave certain
customary representations and warranties, agreed to comply with certain
customary undertakings and gave certain customary indemnities to Jefferies.
The liabilities under those warranties, undertakings and indemnities are
unlimited as to time and amount.
2. MATERIAL CONTRACTS OF THE Joint venture
2.1 The Joint Venture has not entered into any material
contracts in the two years immediately preceding the publication of this
announcement, save for contracts entered into in the ordinary course, or as
set out above.
APPENDIX 4
SIGNIFICANT CHANGE STATEMENT
Save as disclosed below, there has been no significant change in the financial
position of the Group since 31 December 2024, being the date to which the
latest audited consolidated financial statements for the Group were prepared:
· on 29 April 2025, the Company announced that it had
entered into a five-year contract with Volkswagen Group Japan to implement the
Group's platform into all the Volkswagen and Audi dealerships in Japan,
comprising approximately 350 dealerships;
· on 4 March 2025, the Company completed the
acquisition of Seez App Holding Limited;
· on 21 February 2025, the Group announced the
results of an equity fundraise by way of a cash placing to institutional
investors, a separate retail offer, and direct subscriptions to the company.
In total, 11,325,031 Ordinary Shares were subscribed for at a price of 315
pence per Ordinary Shares. The total gross proceeds from the fundraise were
£35.7 million; and
· on 14 February 2025 the Group entered into a five
year contract with GAH to implement the Pinewood Automotive Intelligence™
platform. In recognition of the significant scale of this contract,
Pinewood.AI has issued warrants to an affiliate of GAH.
APPENDIX 5
LITIGATION
There are no governmental, legal or arbitration proceedings (including such
proceedings which are pending or threatened of which the Company is aware)
during a period covering at least the previous 12 months, which may have, or
have in the recent past, a significant effect on the Company's and/or the
Group's financial position of profitability.
There are no governmental, legal or arbitration proceedings (including such
proceedings which are pending or threatened of which the Company is aware)
during a period covering at least the previous 12 months, which may have, or
have in the recent past, a significant effect on the Joint Venture's financial
position of profitability.
APPENDIX 6
RELATED PARTY TRANSACTIONS
Save for the Acquisition, no member of the Group has entered into any related
party transactions between 31 December 2024 (being the end of the last
financial period for which audited financial information has been published)
and the date of this announcement.
APPENDIX 7
VALUATION REPORT
Strictly Confidential: June 4, 2025
Pinewood Technologies Group PLC (the "Company")
2960 Trident Court Solihull Parkway
Birmingham Business Park
Birmingham, West Midlands B37 7YN
United Kingdom
Ladies and Gentlemen:
Kroll, LLC ("Duff & Phelps"), operating through its Duff & Phelps
Valuation Opinions Practice, is serving as an independent financial advisor to
the board of directors of the Company, specifically to provide a valuation
opinion (the "Valuation Opinion") as to the estimated Fair Market Value
(defined below) of the 51% ownership interest in the JV (defined below) held
by Lithia (defined below) via its wholly owned subsidiary PNA Holding LLC as
of June 4, 2025 (the "Valuation Date"). The Valuation Opinion has been
prepared for the purposes of the Proposed Transaction (defined below).
Description of the Proposed Transaction
The Company proposes to acquire the 51% ownership interest in Pinewood North
America, LLC (the "JV") held by Lithia Motors, Inc. ("Lithia") via its wholly
owned subsidiary (PNA Holding LLC), in consideration of which the Company will
issue new ordinary shares in the capital of the Company to Lithia (the
"Proposed Transaction").
Fair Market Value
Fair Market Value is defined as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.
Valuation Methodology
The Valuation Opinion has been prepared in compliance with appropriate
professional standards and pursuant to the requirements of the UK City Code on
Takeovers and Mergers (the "Code") and the prospectus regulation rules of the
UK Financial Conduct Authority (the "FCA") (the "Prospectus Regulation
Rules"). Duff & Phelps used the discounted cash flow methodology to
estimate the Fair Market Value of Lithia's 51% ownership interest in the JV.
The discounted cash flow methodology is a valuation technique that provides an
estimation of the value of a business based on expectations about the cash
flows that the business would generate over time. Beginning with estimations
of the annual cash flows expected to be generated over a discrete projection
period, these cash flows are converted to their present value equivalent using
a rate of return appropriate for the risk of achieving the projected cash
flows. The present value of the estimated cash flows is then added to the
present value of the residual value for the business at the end of the
discrete projection period to arrive at an estimate of fair market value. Duff
& Phelps did not rely on alternative valuation methodologies, such as a
market approach or precedent transaction approach, due to the lack of public
companies and target companies in precedent transactions with comparable
financial performance metrics as the JV, given that the JV is in the early
stages of commercialization in North America.
Valuation Analysis
In applying the discounted cash flow methodology to arrive at an estimated
Fair Market Value, Duff & Phelps held discussions with members of the
Company's finance team, including the Company's Chief Financial Officer, and,
among other things, reviewed or otherwise took the following into account:
· the standalone base case financial projections of the JV,
prepared by management (the "Management Projections"), for the years ending
December 31, 2025 through December 31, 2030;
· certain information provided by the Company relating to the
business, operations, financial condition and probable future outlook of the
JV;
· such other financial analyses and such other information as
deemed appropriate for the purposes of this Valuation Opinion.
Beyond the projection period ended December 31, 2030, Duff & Phelps
utilized a long-term growth rate of 3.00% and the Gordon Growth perpetuity
formula to estimate the terminal value. Duff & Phelps discounted the
resulting free cash flows for the 2025 through 2030 period and the terminal
value using a discount rate range of 15.50% to 17.50%. This discounted cash
flow analysis assesses the current value of the JV on the basis of its
existing pipeline which is solely comprised of the roll-out of Pinewood's
software to Lithia's entire North American car dealership footprint (with the
existing pipeline currently constrained in the view of the Company by Lithia's
majority ownership of the JV), and the assumptions of revenue and
profitability per Lithia car dealership as provided in the Management
Projections.
Valuation Opinion
Based on the discounted cash flow analysis, Duff & Phelps have concluded
on a Fair Market Value range of $73.0 million to $86.1 million for Lithia's
51% ownership interest in the JV, as of the Valuation Date.
Conflicts of Interest / Independence
Other than this Valuation Opinion, during the two years preceding the date of
this Valuation Opinion, Duff & Phelps has not had any material
relationship with any party to the Proposed Transaction for which compensation
has been received or is intended to be received, nor is any such material
relationship or related compensation mutually understood to be contemplated.
Responsibility Statements
(i) For the purposes of Prospectus Regulation Rule
5.3.2R(2)(f), Duff & Phelps is responsible for this Valuation Opinion and
accepts responsibility for the information contained in this Valuation Opinion
and confirms that, to the best of its knowledge, the information contained in
this Valuation Opinion is in accordance with the facts and the Valuation
Opinion makes no omissions likely to affect its import
Save for any responsibility which we have to the Company and any
responsibility arising under the Prospectus Regulation Rules to any person as
and to the extent there provided, to the fullest extent permitted by law we do
not assume any responsibility and will not accept any liability to any other
person for any loss suffered by any such other person as a result of, arising
out of, or in accordance with this Valuation Opinion or our statement above;
and
(ii) For the purposes of the Code, Duff & Phelps is
responsible for this Valuation Opinion and accepts responsibility for the
information contained in this Valuation Opinion and confirms that, to the best
of its knowledge (having taken all reasonable care to ensure that such is the
case), the information contained in this Valuation Opinion is in accordance
with the facts and contains no omissions likely to affect its
import.
Save for any responsibility which we have to the Company and any
responsibility arising under the Takeover Code to any person as and to the
extent there provided, to the fullest extent permitted by law we do not assume
any responsibility and will not accept any liability to any other person for
any loss suffered by any such other person as a result of, arising out of, or
in accordance with this Valuation Opinion or our statements above.
Consent Statement
Duff & Phelps consents to the inclusion of the Valuation Opinion in the
shareholder circular to be published by the Company pursuant to Rule 9 of the
Code and the prospectus to be published by the Company in connection with the
admission of new ordinary shares in the capital of the Company to trading on
the equity shares (commercial companies) category of the Official List of the
FCA and to trading on London Stock Exchange plc's main market for listed
securities (the "Prospectus"), and the references to our name in the form and
context in which they appear therein and, in respect of the Prospectus,
confirming that our consent is given for the purpose of complying with item
1.3 of Annex 3 of assimilated Commission Delegated Regulation (EU) 2019/980 as
it forms part of the law of the United Kingdom by virtue of the European Union
(Withdrawal) Act 2018, as amended.
Professional Credentials
The Valuation Opinion has been carried out on behalf of Duff & Phelps by
David Lee, a managing director and Head of EMEA Transaction Opinions. David
has over 15 years of experience in advising companies, boards of directors,
special committees, limited partner advisory committees, corporate counsel,
trustees, and shareholders.
David specializes in the execution of transaction opinions and valuations in
the context of mergers & acquisitions, private placements, and
recapitalization transactions. He has provided valuation, fairness and/or
solvency opinions in a variety of public and private company transactions and,
accordingly, has sufficient current knowledge of the relevant market and the
necessary skills and understanding to prepare the Valuation Opinion.
David received his M.B.A. in finance from the Fordham Graduate School of
Business and B.S. in finance from The Pennsylvania State University. David
holds the Financial Industry Regulatory Authority Series 7 and 63 licenses.
David also holds the Chartered Financial Analyst ("CFA") designation.
Yours sincerely,
for and on behalf of Kroll, LLC
Kroll, LLC
1 S. Wacker Drive
Suite 7000
Chicago, IL 60606
APPENDIX 8
RULE 29 OF THE TAKEOVER CODE
The Valuation Report set out in Appendix 7 to this announcement was produced
at the Company's request by Kroll. Kroll has given and has not withdrawn its
written consent to the annexure of the Valuation Report to this announcement
and has authorised the contents of the Valuation Report and the inclusion of
its name and the references to it in the form and context in which it is
included.
For the purposes of Rule 29.5 of the Takeover Code, the Directors confirm that
Kroll has confirmed to it that an updated valuation, as at the date of this
announcement, of the Majority JV Interests valued by Kroll would not be
materially different to the valuation given by Kroll as at 4 June 2025 and
contained in the Valuation Report.
APPENDIX 9
RISKS TO THE COMPANY AS A RESULT OF THE ACQUISITION
The Directors consider the following risks to Pinewood.AI as a result of the
Acquisition.
However, additional risks and uncertainties as a result of the Acquisition and
not currently known to the Directors, or that the Directors currently consider
immaterial, may also adversely affect the Group's business, results of
operations, financial condition and prospects. If any or a combination of the
following risks materialise, the Group's business, financial condition and/or
operational performance could be materially adversely affected. In that case,
the trading price of the Ordinary Shares may decline and investors may lose
all or part of the value of their investment.
Additional material risk factors that are specific to the Company and its
Ordinary Shares will be set out in the Prospectus.
The Acquisition may be delayed or may not complete
The Acquisition is conditional upon passing of, inter alia, the Resolutions at
the General Meeting. There can be no assurance that the conditions will be
satisfied and that the Acquisition will complete by the long stop date of 3
September 2025, or at all. Completion will occur on Admission and the
Acquisition Agreement will become unconditional and incapable of termination
following such time. If the conditions to the Acquisition are not satisfied by
the long stop date of 3 September 2025 or the Acquisition Agreement is
otherwise terminated for any reason, the Acquisition will not proceed.
If the Acquisition does not proceed, there may be an adverse impact on the
reputation of the Group and the Group's strategy. Any such reputational risk
could have a material and adverse impact on the Group's business, financial
condition, results of operations or prospects. The Company anticipates that
the Acquisition will allow the Group to attract further significant customers
in the United States, and if the Acquisition does not proceed, this may make
the acquisition of significant customers in the United States more difficult,
which could have an impact on the Group's expected growth.
Given that Lithia has agreed to dispose of its interest in the Joint Venture,
failure of the Group to complete the Acquisition could have a detrimental
impact on the Group's relationship with Lithia, who is a key customer of the
Group, as well as a substantial shareholder. If the Group's relationship with
Lithia was damaged as a result of the failure by the Group to complete the
Acquisition, this could have an adverse effect on the performance of the
business of the Joint Venture, including on the value of the Group's current
interest in the Joint Venture, of which Lithia indirectly owns 51 per cent..
The Group may fail to realise, or it may take longer than expected to realise,
the expected benefits of the Acquisition
The Group may not realise the anticipated benefits that the Company expects
will arise as a result of the Acquisition, or may encounter difficulties,
higher costs or delays in achieving those anticipated benefits. For example,
the Company anticipates that the Acquisition will allow the Group to appeal to
competitors of Lithia in the United States who may currently be dissuaded from
contracting with the Group given its relationship with Lithia, but there is no
guarantee that the Acquisition will result in competitors of Lithia agreeing
to use the Group's products and services.
Additionally, whilst the Company has obtained an independent valuation of the
Joint Venture, the assumptions upon which the valuer estimated the fair market
value of the Joint Venture may prove to be incorrect and the value of the
Joint Venture may be lower than the value of the consideration paid.
Any failure to realise the anticipated benefits that the Company expects to
arise as a result of the Acquisition, or any delay in achieving such
anticipated benefits, could have a material and adverse impact on the Group's
business, financial condition, results of operations or prospects.
The Company has incurred significant costs in connection with the Acquisition,
some of which are payable even in the event the Acquisition does not proceed
The Company expects to incur expenses of approximately £2.1 million in
relation to completion of the Acquisition, and expects to incur further costs
including integration and post-Completion costs, in order to implement the
Acquisition successfully and deliver the anticipated benefits. The actual
costs may exceed those estimated and there may be additional and unforeseen
expenses incurred in connection with the Acquisition. In addition, the Group
has incurred, and will incur, legal, accounting and transaction fees and other
costs relating to the Acquisition, a material part of which are payable
whether or not the Acquisition completes. Such costs could adversely affect
Group's results of operations.
Shareholders, other than Lithia, will experience a dilution of their ownership
of the Company
Pre-emption rights do not apply to the issue of the New Ordinary Shares to
Lithia pursuant to the Acquisition. Following completion of the Acquisition,
Shareholders other than Lithia will experience dilution in their proportionate
ownership and voting interest in the Company compared to their proportionate
ownership and voting interest in the Company immediately prior to completion
of the Acquisition because of the issue of New Ordinary Shares to Lithia. Each
Shareholder other than Lithia will suffer dilution of approximately 12.7 per
cent. to their ownership and voting interests in Pinewood.AI. Accordingly, the
influence that may be exerted by existing Shareholders other than Lithia in
respect of the Group will be reduced.
Following completion of the Acquisition, Lithia's shareholding in the Company
will increase, which may impact the Group's relationships with competitors of
Lithia
As a result of the Acquisition, Pinewood.AI's exposure to Lithia is expected
to increase, particularly through the expansion of Lithia's shareholding in
the Company. While this deepened relationship may offer strategic alignment
and opportunities for collaboration, it also represents a shift in the
Company's Shareholder profile. Changes of this nature may influence third
party's perception of the Company's independence and positioning within the
broader market. Although Pinewood.AI remains committed to serving all
customers equally and maintaining its open, partner-neutral approach, it is
possible that some existing customers may reassess their commercial engagement
with Pinewood.AI over time, and potential new customers who are competitors of
Lithia may be less likely to switch to using the Group's products, depending
on how they interpret the evolving shareholder landscape. If the Group's
existing customers were to cease to use the Group's products, or potential new
customers were to decline to switch to the Group's products, as a result of
their interpretation of Pinewood.AI's shareholder profile, this could have a
material and adverse impact on the Group's growth strategy, business,
financial condition, results of operations or prospects.
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