Acquisition

Lookers PLC
22 July 2004

                                                                    22 July 2004


                                  LOOKERS plc

                    PROPOSED ACQUISITION OF FPS DISTRIBUTION
                                For £31 Million


Lookers, one of the leading multi-franchise motor retail groups in the UK,
announces the acquisition of FPS Distribution Limited ('FPS Distribution'), one
of the largest wholesale distributors of vehicle parts to the UK automotive
aftermarket for a consideration of £31 million, payable in cash on completion.


•  FPS Distribution (originally established in 1934) has an established
track record and market position in the UK automotive aftermarket, with 19
distribution centres nationwide and a customer base of over 2,400 independent
motor factors



•  FPS Distribution's turnover for the year ended 31 March 2004 was £63.2
million with operating profit of £3.2 million



•  The Acquisition represents an important step in Lookers' strategy of
broadening the base of its revenue stream from the automotive industry



•  The Directors expect that the Acquisition will be earnings enhancing
after taking into account the amortisation of goodwill, in the first full year
of ownership



•  The Acquisition is subject to the approval of Lookers' shareholders.

This approval will be sought at an extraordinary general meeting expected to be
held on or around 9 August 2004



•  Trading in the first half of the year is in line with the Board's
expectations



•  The Board now expects that the net amount receivable by Lookers from HM
Customs and Excise regarding VAT overpaid in the period 1973 to 1996 will be at
least £17.5 million


Commenting on today's announcement, Fred Maguire, Chairman of Lookers, said:


'FPS Distribution is a high quality business with excellent relationships in the
UK automotive aftermarket.  This strategic acquisition enhances the Group's
earnings potential in the fast growing after sales market and reinforces
Lookers' commitment to delivering excellent products and services to its
customers through its 'Customers for Life' programmes.'



This summary should be read in conjunction with the full text of the following
announcement. Appendix I contains the definitions of terms used in this
announcement.



Press Enquiries:


Lookers plc                                                        0161 291 0043

Fred Maguire (Chairman)

Ken Surgenor (Chief Executive)

David Dyson (Finance Director)


N M Rothschild & Sons Limited                                      0161 827 3800

Andrew Thomas


gcg hudson sandler                                                 020 7796 4133

James Hill



N M Rothschild & Sons Limited, which is authorised and regulated by the
Financial Services Authority, is acting exclusively for Lookers and for no-one
else in connection with the Acquisition and will not be responsible to anyone
other than Lookers for providing the protections afforded to customers of
Rothschild or for providing advice in relation to the Acquisition.


                                  Lookers plc


                    PROPOSED acquisition of FPS Distribution


Introduction

The Board of Lookers announces the proposed acquisition of FPS Distribution, one
of the largest wholesale distributors of vehicle parts to the UK automotive
aftermarket. Alongside the continuing development of the Group's core
manufacturer franchise business, this is another important step in Lookers'
strategy of broadening the base of its revenue streams from the automotive
industry.



The total consideration of £31.05 million is payable in cash upon Completion.
The Acquisition, which will be undertaken by DSM Autos Limited (a wholly owned
subsidiary of Lookers), will be funded from the Group's existing cash reserves
and new banking facilities.



In view of its size, the Acquisition is conditional upon the approval of
Lookers' shareholders.  The Chairman of Lookers will write to Lookers
Shareholders as soon as practicable to provide them with further details of the
Acquisition and convene an Extraordinary General Meeting, expected to take place
on or around 9 August 2004, to seek such approval.



Background to and reasons for the Acquisition

Lookers is one of the UK's leading multi-franchise motor retail groups,
operating a network of 93 outlets, vehicle servicing and parts sales facilities.
Aftersales activities, comprising vehicle servicing, parts sales, tyres and
bodywork, are an important contributor to the Group's profits and in the year
ended 31 December 2003 generated approximately 47 per cent. of the total gross
profit of the Group from a substantially lower proportion of the Group's sales.



Originally established in 1934, FPS Distribution is the leading UK wholesale
distributor of vehicle parts to the automotive aftermarket, with 19 distribution
centres nationwide. The Acquisition will enable the Enlarged Group to enhance
its earnings potential in the aftersales market through a business which
directly complements its main activity of vehicle sales and servicing.



FPS Distribution has an established track record and market position with
excellent prospects for continued growth and high quality earnings potential.
The Directors believe that the Enlarged Group will benefit from FPS
Distribution's proven expertise in parts handling, stock control and
distribution which can be applied to all areas of the existing Lookers business.



The acquisition of FPS Distribution will enable the Group to play a significant
role in the wholesaling of vehicle parts to local distributors (factors).  This
is an area of potential growth in the automotive industry where Lookers has
previously played only a minor role.



Information on FPS Distribution

FPS Distribution is a nationwide wholesale distributor of vehicle parts to the
UK automotive aftermarket. FPS Distribution's two main services are:



(a) same day delivery of parts required by customers for immediate resale,
generally serviced from its national network of 19 distribution branches; and



(b) overnight fulfilment of customer stock orders on behalf of third party
original equipment manufacturers, serviced from FPS Distribution's national
distribution centre.



FPS Distribution's customer base comprises over 2,400 independent motor factors
operating more than 3,500 outlets located across the UK.  The summarised
historical results of FPS Distribution are set out below.




                                                              56 weeks             52 weeks         52 weeks
                                                                 ended                ended            ended
                                                              30 March             29 March         27 March
                                                                  2002                 2003             2004

                                                                 £'000                £'000            £'000

Turnover                                                        55,104               59,086           63,220

Operating profit (pre-exceptional credits)                       1,132                2,303            3,212

Net assets                                                      13,742               15,375           18,168





FPS Distribution comprises two statutory companies FPS Distribution Limited and
its wholly owned subsidiary, Ferraris Piston Services Limited.  FPS Distribution
is currently owned by ABN AMRO Capital and its management and employees.



Financial effects of the Acquisition

The Directors expect that the Acquisition will be earnings enhancing, after
taking into account the amortisation of goodwill, in the first full year of
ownership. The foregoing statement should not be interpreted as a profit
forecast nor to mean that Lookers' future earnings per share will necessarily be
greater than its historical earnings per share.



Financing the Acquisition

Lookers has conditionally agreed to acquire the entire issued share capital of
FPS Distribution for a total consideration of £31.05 million, payable in cash
upon Completion. The Acquisition will be financed from the Group's existing cash
reserves and new banking facilities. The Lookers Group has entered into a new
committed loan facility totalling £30 million with Lloyds TSB Bank plc to
finance the Acquisition.



The Acquisition will result in a cash outflow of approximately £31.05 million.
The Board of Lookers believes that the level of gearing that will result if the
Shareholders approve the Acquisition will be acceptable given the cash
generative nature of the Enlarged Group and it is envisaged that borrowing
levels will be steadily reduced. The Directors are confident that the Enlarged
Group will retain sufficient financial flexibility to continue to invest in
developing the business and to take advantage of further acquisition
opportunities as they arise.



Principal terms and conditions of the Acquisition

The Acquisition Agreement contains various warranties and indemnities in favour
of the Group which are typical for a transaction of this nature. The warranties
are provided by the sellers of approximately 27 per cent. of the share capital
of FPS Distribution (being the management shareholders) who shall be liable for
up to £5 million in the event of any future claim.  No warranties (other than in
respect of title and capacity) are given by the institutional shareholders or
the employee shareholders of FPS Distribution.



The Acquisition is conditional upon the approval of Lookers Shareholders.  It is
expected that Completion will take place on 9 August 2004 or as soon thereafter
as all of the conditions have been satisfied.



FPS Distribution's management and employees

One of the key attractions of the Acquisition for Lookers is the industry
experience of FPS Distribution's management team. The senior management of FPS
Distribution have agreed to enter into service contracts with FPS Distribution
for a period of at least twelve months from the date of the Acquisition.



Lookers intends that the senior management of FPS Distribution will be strongly
incentivised to participate in the continuing growth of the business. Lookers
also intends to make available appropriate employee incentivisation arrangements
to the senior FPS Distribution employees.



It is anticipated that career opportunities for employees of the Enlarged Group
will be enhanced as a result of the Acquisition.  Lookers has confirmed that
existing FPS Distribution employment agreements will be honoured.



Current trading and prospects

The Group updated shareholders on current trading in the first quarter in the
AGM statement on 13 May 2004.  Trading in the second quarter is typically at
lower levels than the first quarter and the current year has been no exception,
but overall, trading for the first half year was in line with the Board's
expectations.



The Board also announced on 24 May 2004 that the Group had successfully
negotiated with HM Customs and Excise its initial claim in respect of VAT
overpaid in the period 1973 to 1996 and that the Board anticipated that it would
receive at least £15 million net of expenses. The Board now expects that the net
amount receivable by Lookers will be at least £17.5 million.



The Acquisition will enable the Enlarged Group to enhance its earnings potential
in the aftersales market through a business which complements its main
activities of vehicle sales and servicing.



Industry forecasts suggest 2004 will be the fourth consecutive record year for
the new vehicle market.  The continuing strong car market combined with Lookers'
ongoing commitment to providing quality customer services and its organic
initiatives in reducing costs and driving operating efficiencies give the Board
confidence that the Enlarged Group will achieve a strong performance this year.



Recommendation

The Directors, who have been advised by Rothschild, consider that the
Acquisition is in the best interests of Lookers and its shareholders as a whole.
In providing advice to the Directors, Rothschild has taken into account the
Directors' commercial assessments of the Acquisition.



In the forthcoming circular to Shareholders, the Directors unanimously recommend
that you vote in favour of the Acquisition at the Extraordinary General Meeting,
as they have irrevocably undertaken to do in respect of their own beneficial
interests, which in aggregate amount to 616,981 Lookers Shares, representing
approximately 1.75 per cent of the issued ordinary share capital of the Company.



In addition, the Company has received irrevocable undertakings from certain
other shareholders holding in aggregate, 10,071,320 Lookers shares, representing
approximately 28.64 per cent of the existing issued ordinary share capital, to
vote in favour of the Acquisition at the Extraordinary General meeting.





                                   APPENDIX I



                                  DEFINITIONS



The following definitions apply throughout this Press announcement unless the
context requires otherwise:


'Acquisition'                                          the proposed acquisition of FPS Distribution Limited by
                                                         DSM Autos Limited (a wholly owned subsidiary of
                                                       Lookers)


'Acquisition Agreement'                                The conditional agreement dated 21 July 2004 between
                                                       DSM Autos Limited and the shareholders of FPS
                                                       Distribution pursuant to which Lookers will effect the
                                                       Acquisition a summary of which will be set out in the
                                                       Circular


'Act'                                                  The Companies Act 1985, as amended


'Articles of Association'                              The articles of association of the Company from time to
                                                       time in force and references to an 'Article' shall be
                                                       construed accordingly


'Circular'                                             The document to be sent to Shareholders in connection
                                                       with the Acquisition and containing the notice
                                                       convening the Extraordinary General Meeting


'Completion'                                           Completion of the Acquisition pursuant to the
                                                       Acquisition Agreement


'Directors' or 'Board'                                 The Directors of Lookers at the date of the Circular


'Enlarged Group'                                       The Lookers group as enlarged by the Acquisition




'Extraordinary General Meeting'                        The extraordinary general meeting expected to be held
                                                       on or around 9 August 2004 for the purpose, inter-alia,
                                                       of giving approval to the Acquisition


'Group'                                                the Company and its subsidiaries, as at the date of
                                                       this announcement


'Lookers' or 'the Company'                             Lookers plc


'Lookers Shares'                                       Ordinary shares of 25p each in Lookers


'Lookers Shareholders'                                 Holders of Lookers Shares


'Lookers Share Option Schemes'                         The Lookers Execution Share Option Scheme, the Lookers
                                                       Company Share Scheme and the Lookers plc Key Executive
                                                       Incentive Performance Plan


'FPS Distribution'                                     FPS Distribution Limited Limited and its wholly owned
                                                       subsidiary, Ferraris Piston Service Limited


'New Bank Facility'                                    The facility for £30m to be provided by Lloyds TSB Bank
                                                       plc


'Rothschild'                                           N M Rothschild & Sons Limited


'United Kingdom' or 'U.K.'                             United Kingdom of Great Britain and Northern Ireland




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