Industry rumours are rife that a fresh overseas bid is imminent for auto retailer Lookers after a key shareholder in the London-listed group withdrew support for a £465 million takeover by Canada's Alpha Auto Group.

Shares in Lookers, owner of the former Taggarts chain of car dealerships in Scotland, closed yesterday's trading more than 10% lower after the Manchester-based group said it does not expect to muster enough support to approve the acquisition at a meeting scheduled for Thursday. Directors recommended the 120p per share offer from Alpha Auto in June.

Although the meeting will go ahead directors now believe the vote will fall short of the 75% approval needed after its largest shareholder, Cinch Holdco, said it no longer favours the deal. Cinch is owned by Constellation Automotive Group, which also owns Marshal Motors, BCA and We Buy Any Car.

READ MORE: Lookers: Auto heavyweight agrees to Canadian takeover bid

"In this event, the Lookers directors will continue to pursue constructive engagement with all shareholders, including Cinch, who continues to be the Company's largest shareholder holding approximately 19.52% of the issued share capital," the company said in a statement.

Lookers is the UK's third-largest motor retail chain with approximately 140 franchised dealerships representing some 30 manufacturers. Its Scottish outlets include sites in Edinburgh, Motherwell, Glasgow, Stirling and Ayr.

When the offer from Alpha Auto was revealed in June, it has support from shareholders controlling 42% of Lookers' issued equity. However, the ensuing jump in the company's share price allowed many investors to sell down their holdings, eroding support for the deal.

Cinch parent company Constellation appears to have held fast to its stake and is now believed to have been in conversations with at least one group that is mooting a rival takeover offer at a higher price. Constellation has not stated why it now intends to vote against the bid from Alpha Auto.

Industry trade publications are reporting that a rival bid is expected to be tabled soon, most likely by acquisitive US car dealer group Lithia Motors. 

READ MORE: Lookers deal sends automotive sector speculation racing

Liberum analyst Sanjay Vidyarthi said in June that the offer from Alpha Auto looked "cheap", suggesting that a target price of 150p was more sensible. Lithia, whose stated aim is to grow its revenues through acquisitions, took over the UK's Jardine Motors in a £300m deal earlier this year.

With revenues of £4.3 billion last year, Lookers is led by chief executive Mark Raban who originally joined the group as chief financial officer from Marshall Motor Group in 2019.

He moved into the top post a few months later and since then has led the group through a series of challenges that included the onset of the Covid pandemic, with health-related trading restrictions pushing Lookers into a £50m loss in 2020 as it was forced to close its showrooms for large parts of the year.

During that year the group also uncovered a £19m hole in its accounts related to “misrepresented and overstated debtor balances” and “a number of fraudulent expense claims” within one of its operating divisions. This triggered a tough two years as the Financial Conduct Authority (FCA) scrutinised compliance procedures while Lookers worked with the financial regulator to resolve any concerns.

Things turned a corner when the group posted a record underlying pre-tax profit of £90.1m for 2021, driven primarily by surging margins on used vehicles as Covid disruptions and global semiconductor shortages cut the supply of new cars coming off the assembly line. That was followed by a pre-tax profit of £81m in 2022, which represented growth of 3% after the exclusion of £9.8m of Covid government grant support received the previous year.