Shares in Pinewood Technologies (LON:PINE) surged after the automotive software provider said it is minded to recommend a £545 million takeover offer from Ridgeview Partners.
The US private equity firm has tabled an offer at £4.48 in cash for ‘Pinewood.AI’. However, one of Pinewood.AI’s largest shareholders, Harwood Capital, is preparing to vote against the deal.
Harwood owns 5.7% of the automotive software business and objects to preferential liquidation rights included in Ridgeview’s proposal.
What does Pinewood.AI do?
For the uninitiated, Pinewood.AI was spun out from automotive retailer Pendragon in 2024.
This separation followed the sale of Pendragon’s UK Motor and Leasing divisions to Lithia Motors (LAD:NYSE). A North American dealerships giant, Lithia retains a 32% stake in Pinewood.AI.
Pinewood.AI provides a cloud-based automotive intelligence platform. This helps car dealerships and manufacturers manage everything from vehicle sales and customer relationships to repairs and accounting.
Certain cash value today
Pinewood.AI’s board believes the Ridgeview offer represents an ‘attractive opportunity’ for shareholders to ‘realise an immediate and certain cash value today’ for their investment. In addition, the offer is at a level which ‘may not be achievable until the execution of the strategy is delivered over the medium to longer term’, warned the board.
Furthermore, the board cautioned that this execution is ‘subject to a wide range of uncertain potential outcomes’.
Shareholders would be able to accept the cash offer or roll their stakes into the newly private business.
Damaging precedent
However, The Times reports that Ridgeview would be paid first in the event of a future sale or liquidation. And existing Pinewood investors who rolled over their shares would rank behind Ridgeview.
Harwood founder Christopher Mills told The Times he has ‘never encountered similar terms’. Mills warned that accepting them could create a damaging precedent for investors in UK-listed companies.
Investors holding 48.7% of Pinewood’s shares have indicated support for the possible offer, but Harwood currently intends to vote against the transaction. Harwood could support the deal and retain its stake, if the rollover terms are amended.
Although it represents a 43% premium to Pinewood.AI’s closing price of 314p on Thursday, Ridgeview’s proposal looks a low-ball offer to us.
Keep in mind that in January, Pinewood looked set to agree a £575.5 million takeover by Apax Partners pitched at 500p per share. Apax withdrew its offer the following month, blaming ‘prevailing challenging market conditions’ for its decision to walk away.
We also think it would be a shame to see the London stock market lose yet another innovative growth company. Pinewood.AI is in a strong position to grow its share of the North American automotive dealer software market. The Birmingham-based company reported an impressive 30% rise in revenue to £40.5 million for FY25. Underlying pre-tax profits revved up from £8.5 million to £8.8 million.
Read the press release here: https://pinewood.ai/investors/home/
