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Investing.com -- Shares of Pinewood Technologies Group (LON:PINE) jumped over 11% on Friday after the company announced a $150 million agreement to buy Lithia Motors Inc .’s (NYSE:LAD) 51% stake in their North American joint venture, Pinewood North America LLC, gaining full ownership of the platform and clearing a path to expand its dealership software across the U.S. and Canada.
The consideration will be satisfied through the issuance of 14,560,691 new ordinary shares at 386.5 pence each, based on the volume-weighted average price of Pinewood’s stock over the 30 days preceding the June 6 announcement.
The joint venture, launched Feb. 1, 2024, was established to co-develop and commercialize Pinewood’s dealership management system (DMS) for the North American market.
Lithia Motors currently holds a 51% equity interest, with Pinewood holding 49%. Full ownership is expected to strengthen Pinewood’s position in a key growth market and eliminate what the company called a “competitor overhang,” a deterrent for other dealership groups wary of adopting a platform partially owned by a rival operator.
The acquisition is expected to close in the third quarter of 2025, subject to shareholder approval and the Financial Conduct Authority’s clearance for the publication of a prospectus.
Pinewood.AI also announced a five-year software deployment agreement with Lithia. Under the contract, Pinewood’s software will be rolled out across all Lithia dealerships in the U.S. and Canada by the end of 2028.
The company anticipates generating about $40 million in annual recurring revenue from the contract, rising to about $60 million following the full deployment of additional layered applications.
Independent (LON:IOG) directors of Pinewood.AI said the transaction would unlock strategic growth opportunities in North America by giving the company full control over its regional operations and enabling broader adoption of its platform among dealership groups.
The valuation is supported by an independent fairness opinion from Kroll LLC, which estimated the fair market value of Lithia’s 51% stake at $86.1 million.
The estimate is based on a discounted cash flow analysis of revenues expected under the DMS rollout across Lithia’s dealership network.
“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.,” said Bill Berman, chief executive officer of Pinewood Technologies Group.
“This agreement represents the next step in our strategic partnership with Pinewood.AI and supports our vision to modernize customer experiences across our ecosystem,” said Bryan DeBoer, chief executive officer of Lithia Motors Inc., in a statement
Pinewood said that by fully owning the joint venture, it would improve its competitive position in North American automotive software.