Sale&Leaseback/Share split/TU

Pendragon PLC
28 November 2006


28 November 2006
                  Pendragon Plc ('Pendragon' or the 'Company')

   Proposed sale and leaseback by Pendragon of Properties to PPH1 and related
                                  transactions

             Proposed sub-division of Existing Ordinary Shares and
                 renewal of authority to make market purchases

Summary

   • Proposed sale and leaseback of 81 properties to a joint venture company
     owned by Pendragon Group and NWPIL (a wholly owned subsidiary of RBS)
   • Represents an expansion of the joint venture formed by Pendragon and
     NWPIL in November 2005
   • Provides an opportunity to realise cash from the properties and reduce
     existing debt levels whilst enabling Pendragon to continue to share in any
     increased value of the properties and ensuring that they remain available
     for use by the Group
   • Consideration for the sale is £257.8 million and net cash proceeds are
     £238.9 million after Pendragon's increased equity investment in the joint
     venture of £14.3 million, expenses and prepaid rent
   • Each property will be leased back to the Group on a 25 year lease for an
     aggregate initial annual rent of £16.3 million
   • Proposed Share Split comprising a five-for-one sub-division of Existing
     Ordinary Shares designed to enhance the liquidity and marketability of the
     Company's ordinary shares

Commenting on the Transaction, Trevor Finn, CEO of Pendragon, said today:

'This transaction is in line with our plan to bring down gearing to more normal
levels after the acquisition of Reg Vardy. The property joint venture enables us
to release capital tied up in property assets and invest in higher yielding
businesses whilst retaining operational flexibility.'

This summary should be read in conjunction with the full text of the following
announcement.

The Appendix contains the definitions of certain terms used in this summary and
the full announcement.

Enquiries:

Pendragon Plc
Trevor Finn, Chief Executive         01625 725114
David Forsyth, Finance Director

Finsbury Group
Gordon Simpson                       020 7251 3801


General

Ernst & Young LLP, which is authorised and regulated in the United Kingdom by
the Financial Services Authority for designated investment business, is acting
exclusively for Pendragon plc and for no one else in relation to the Transaction
and will not be responsible to anyone other than Pendragon plc for providing the
protections afforded to clients of Ernst & Young LLP or for giving advice in
relation to the Transaction or any other matter referred to in this
announcement.

The distribution of this announcement in certain jurisdictions may be restricted
by law and therefore persons into whose possession this announcement comes
should inform themselves about and observe any such restrictions. Any failure to
comply with these restrictions may constitute a violation of the securities laws
of any such jurisdiction.

The information contained herein is not for publication or distribution in or
into the United States of America, Canada, Australia or Japan. These materials
are not an offer of securities for sale in the United States of America, Canada,
Australia or Japan. The securities referred to herein have not been and will not
be registered under the U.S. Securities Act of 1933 (the 'Securities Act'), as
amended, and may not be offered or sold in the United States absent registration
under the Securities act or any available exemption from registration. No public
offering of the securities referred to herein will be made in the United States.

Certain statements contained in this announcement constitute 'forward-looking
statements'. In some cases, these forward-looking statements can be identified
by the use of forward-looking terminology, including the terms 'believes',
'estimates', 'plans', 'prepares', 'anticipates', 'expects', 'intends', 'may',
'will', or 'should' or, in each case, their negative or other variations or
comparable terminology. Investors should specifically consider the factors
identified in this announcement which could cause actual results to differ
before making an investment decision. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors, which may cause the
actual results, performance or achievements of Pendragon or industry results, to
be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such forward-looking
statements are based on numerous assumptions regarding Pendragon's present and
future business strategies and the environment in which Pendragon will operate
in the future. These forward-looking statements speak only as at the date of
this announcement. Except as required by the Listing Rules, the Prospectus
Rules, the Disclosure Rules, the London Stock Exchange or applicable law, the
Company expressly disclaims any obligations of undertaking to release publicly
any updates or revisions to any forward-looking statements contained in this
announcement to reflect any change in the Company's expectations with regard
thereto or any change in events, conditions or circumstances on which any such
statement is based.


                                  Announcement

28 November 2006
                  Pendragon Plc ('Pendragon' or the 'Company')

   Proposed sale and leaseback by Pendragon of Properties to PPH1 and related
                                  transactions

             Proposed sub-division of Existing Ordinary Shares and
                 renewal of authority to make market purchases

Introduction

Pendragon announces that it has conditionally agreed to dispose of its interest
in 81 properties to PPH1, each of which would then be leased back to the Group.
The consideration for this disposal is approximately £257.8 million. Accordingly
the Transaction is a Class 1 transaction for Pendragon under the Listing Rules.

PPH1 is a wholly owned subsidiary of PPH0, which is in turn a joint venture
company owned by the Pendragon Group and NWPIL (a wholly owned subsidiary of
RBS). As part of the terms of the Transaction, it is proposed that the Joint
Venture Agreement be amended to include deadlock provisions under which, in
certain circumstances, Pendragon could be obliged to sell its shareholding in
PPH0. As the consideration for such a sale is not currently known and may be up
to £1.5 billion, Pendragon is required to treat the deadlock provisions as a
Class 1 transaction under the Listing Rules.

Further, as PPH0 is a 50/50 joint venture company (as defined in the Listing
Rules), each of NWPIL (as a 50/50 joint venture partner), PPH0 and PPH1 (as
associates of NWPIL) are related parties of the Company under the Listing Rules.
Consequently, the various elements included in the Transaction are all treated
as related party transactions under the Listing Rules.

For these reasons, the Transaction is subject to approval by the Company's
Shareholders and a circular must be sent to Shareholders to convene an
Extraordinary General Meeting to seek this approval.

Pendragon also announces that it proposes to seek the approval of Shareholders
to subdivide each of the Existing Ordinary Shares of 25 pence each into five New
Ordinary Shares of 5 pence each. The articles of association of the Company and
the Act require that a sub-division of existing shares is approved by
shareholders. Shareholders are also being asked to approve a replacement
authority for the Company to purchase its own shares, as required by the Act.

An Extraordinary General Meeting is to be held for the purpose of approving the
Transaction and Share Split and a notice convening the EGM will be included in a
circular to shareholders (the 'Circular') which will be published shortly.


Sale and leaseback by Pendragon of Properties to PPH1 and related transactions

Details of the Transaction
On 2 November 2005, Pendragon announced that it had successfully completed a
Joint Venture Agreement with NWPIL and subscribed for shares in PPH0, the joint
venture company. PPH0 is a holding company with a wholly owned subsidiary, PPH1.
At that time, PPH1 acquired certain properties from the Pendragon Group, which
were in each case then leased back to the Group.

The business of the PPH0 Group is to purchase and hold properties as an
investment. The only properties presently owned by the PPH0 Group are those that
it has acquired from members of the Pendragon Group, as set out in the paragraph
above.

It is now proposed that the Pendragon Group will sell the Properties to PPH1 for
an aggregate cash consideration of approximately £257.8 million. In order to
permit its continued presence at the Properties, the Group will then enter into
the Leases with PPH1 for an aggregate initial annual rent of £16.3 million. The
sale and leaseback of certain of the Properties are subject to conditions
relating to those Properties. If these conditions are not satisfied, the
relevant Property will be excluded from the sale and the consideration will be
reduced accordingly.

Pendragon, through its wholly owned subsidiary PGSL, owns a 51 per cent.
interest in PPH0 with the remaining 49 per cent. owned by NWPIL. PPH1 will
finance the acquisition of the Properties in part from the proceeds of further
equity investment in PPH0 of up to £14.3 million by PGSL and £13.8 million by
NWPIL (subject to reduction if Properties are excluded from the sale to PPH1, as
explained above). The balance of the finance will come from additional
borrowings provided to PPH1 by RBS on commercial terms comprising a nine year
facility of up to £232.3 million at market interest rates with no recourse to
Pendragon. Following completion of the Transaction, and assuming that PPH1
acquires all of the Properties, the aggregate amount invested by the Pendragon
Group in PPH0 will be £22.0 million.

Certain changes will be made to the Joint Venture Agreement, which governs the
relationship between the shareholders of PPH0, in order to facilitate the
acquisition of the Properties by PPH1 and the equity investment into PPH0. These
include the addition of deadlock provisions, the effect of which is summarised
under the heading ''deadlock provisions'' below. The changes have been
negotiated with NWPIL and are required for the Transaction to proceed.

Further information on the Transaction and the principal terms of the Joint
Venture Agreement will be set out in the Circular.

Background to and reasons for the Transaction
The changes to the Block Exemption rules in 2003 have enabled Pendragon to
pursue with more confidence its stated strategy of growing its business with
selected manufacturer partners. The Block Exemption rules introduced greater
certainty and opportunities for motor dealers to take a longer term view and to
build value within their businesses as manufacturers are no longer able to
terminate franchise agreements without transparent and objective reasons. Given
this enhanced security of tenure, Pendragon believes that the previous benefits
of owning its dealership properties are no longer so relevant. The Group
believes that by investing less cash in property it is able to generate greater
returns by investing in motor car dealership businesses.

The initial Joint Venture Agreement and transaction allowed the Group to realise
cash from properties and reduce existing debt levels, and also permitted
Pendragon to continue to share in any increased value of those properties whilst
ensuring that they remained available for use by the Group.

The Transaction represents an expansion of the joint venture and an opportunity
to increase existing benefits. It also represents an important step in making
more efficient use of the property assets acquired by Pendragon as a result of
the recent acquisition of Reg Vardy plc, as a number of the Properties relate to
Reg Vardy dealerships.

Information on the Properties
The Properties comprise 81 car showrooms, forecourts, offices and workshop
properties, located
throughout the United Kingdom and used by the Group for its motor car retailing
business. Freehold or long leasehold title to the Properties is currently owned
by members of the Pendragon Group.

The aggregate net book value of the Properties as at 30 June 2006, the date of
the Group's most recent unaudited interim financial statements, was £158.3
million and after making fair value adjustments amounted to £212.1 million.

Principal Terms and Conditions of the sale and leaseback
Members of the Pendragon Group will dispose of their respective existing
interests in the Properties by selling their title in them to PPH1. The gross
consideration for the Properties is expected to be £257.8 million and will be
payable to the respective selling Group companies in cash at the time the
Properties are sold.

Each of the Properties will, subject to completion of the relevant transfer, be
leased back on identical terms to the respective seller. Each Lease is for a
term of 25 years on a tenant full repairing and insuring basis. The aggregate
initial annual rent is approximately £16.3 million. The Leases all provide for
upward only rent reviews at annual intervals with the reviewed rent to be
increased in line with the increase in the Retail Prices Index (All Items)
issued by the office for National Statistics and capped at 2.8 per cent. per
annum. Each Lease will be entered into immediately after the relevant transfer
is completed.

Further information on the sale and leaseback will be set out in the Circular.

Use of Proceeds and Financial Effects of the Transaction
The initial gross cash proceeds of the Transaction receivable by the Pendragon
Group are expected to be £257.8 million. The net cash proceeds of £238.9 million
(after taking into account Pendragon's increased equity investment in PPH0 plus
Pendragon's own expenses estimated at £0.6 million and prepaid rent of £4.0
million) will be used to reduce the Group's borrowings.

The Properties do not generate any income for the Group. Following the
Transaction, the Board expects that the rental charges payable under the Leases
will not be significantly different from the aggregate of (1) the interest saved
on the reduction in borrowings consequent on the receipt of the net proceeds of
the Transaction, (2) the reduction in depreciation charged on the Properties,
and (3) the Group's share of the net income from its investment in PPH0.
Accordingly the Board does not expect the effect of the Transaction on the
Group's continuing profit to be material.

A summary of the financial effects of the Transaction on the Group's net assets
will be set out in the unaudited pro-forma financial information set out in the
Circular.

Deadlock provisions
As part of the terms of the Transaction, the Joint Venture Agreement will be
amended to include deadlock provisions. In the event of a deadlock arising
between the shareholders of PPH0 in relation to certain matters, the
shareholders of PPH0 would meet with a view to resolving the issue giving rise
to the deadlock. If no resolution is agreed then either shareholder may serve
notice (such shareholder being the ''First Shareholder'') on the other (the ''
Second Shareholder'') offering to purchase the shares of the Second Shareholder
at a price determined by the First Shareholder (provided that price may not
exceed £1.5 billion). In response, the Second Shareholder may:

• do nothing, in which case it is required to sell its shares to the
  First Shareholder at the price offered by the First Shareholder 
  (a ''Deadlock Forced Sale''); or
• serve a counter notice on the First Shareholder, it which case the
  First Shareholder is required to sell all of its shares to the Second
  Shareholder at that same price.

In the event of a Deadlock Forced Sale where Pendragon is the seller, it is not
presently possible to state the effect of the transaction upon the Group or its
earnings, assets and liabilities save that the earnings (comprising rental
income less interest and tax) and assets relating to the PPH0 Group (described
below) would cease to be included in Pendragon's consolidated accounts. In
particular the price payable for its shares would be set by the other
shareholder (currently NWPIL), and the sale may accelerate certain tax charges
in the PPH0 Group in relation to the gain in value of properties acquired from
the Pendragon Group during the period when they were owned by a member of the
Pendragon Group. Pendragon has agreed to subscribe for further deferred equity
in PPH0 in order to fund those charges (the maximum amount of those tax charges
is estimated at £40 million).

In the event that a Deadlock Forced Sale arises and the Company is required to
sell its interest in PPH0, the Directors currently intend to use the sale
proceeds for general corporate purposes.

Further information on the deadlock provisions will be set out in the Circular.

Financial information relating to Pendragon's interest in PPH0
As shown in the table below, for the year ended 31 December 2005, Pendragon
Group's share of post tax profit from the PPH0 Group was £0.1 million (2004:
nil). As at 31 December 2005, Pendragon Group's Investment in the PPH0 Group was
£1.4 million (2004: nil) which is analysed below.

                                                                  2005    2004
                                                                    £m      £m
Non-current assets                                                47.1       -
Current assets                                                     7.2       -
Non-current liabilities                                          (41.0)      -
Current liabilities                                               (6.7)      -
                                                                  ------  ------
Share of net assets                                                6.6       -
Less: unrealised profits on sales to PPH0 and its subsidiaries    (5.2)      -
                                                                  ------  ------
Net assets                                                         1.4       -
                                                                  ------  ------

Income                                                             0.5       -
Expenses                                                          (0.4)      -
                                                                  ------  ------
Post tax profit                                                    0.1       -

The above table has been extracted without material adjustment from the audited
consolidated statutory accounts of Pendragon for the year ended 31 December
2005. The unaudited interim financial statements of Pendragon for the 6 months
ended 30 June 2006 disclose that Pendragon Group's share of post tax profit from
the PPH0 Group was £0.3 million (6 months ended 30 June 2005: nil) and at 30
June 2006 its Investment in the PPH0 Group was £2.2 million (30 June 2005: nil).


Proposed sub-division of Existing Ordinary Shares

In recent years the price of the Company's ordinary shares has risen
considerably. The closing mid-market price for one Existing Ordinary Share on 24
November 2006 (the latest practicable date before this announcement) was 572.5
pence. The Directors believe that it is appropriate to propose the Share Split,
which comprises a five-for-one sub-division of Existing Ordinary Shares, and
that this will enhance the liquidity and marketability of the Company's ordinary
shares.

The Company's authorised ordinary share capital prior to the Share Split is
£40,000,000, which is divided into 160,000,000 Existing Ordinary Shares, having
nominal value of 25 pence each. The Company's issued ordinary share capital is
£32,801,367 divided into 131,205,468 Existing Ordinary Shares, having a nominal
value of 25 pence each. Following the Share Split, the total value of the
authorised ordinary share capital will remain at £40,000,000 but will be divided
into 800,000,000 New Ordinary Shares of 5 pence each.


Current trading and prospects of the Pendragon Group

On 7 August 2006, Pendragon announced its unaudited interim results for the half
year ended 30 June 2006. Pendragon stated that trading performance across the
Group had been good against the backdrop of a weaker UK new car market which was
down by 4.2 per cent. year on year. Pendragon reported growth of 14 per cent. in
adjusted earnings per share and an increase in Group revenues of £894.3 million
to £2,645.5 million.

Since the interim results date, UK interest rates have risen to a five year high
of 5 per cent. and we believe this is adversely impacting on consumer
confidence. Whilst this has made trading conditions more difficult, we still
expect to finish the year broadly in line with our expectations.

Good progress has been made on the integration of the Reg Vardy group acquired
earlier this year with a new Group structure now in place. However, certain
aspects of the integration process had to be put on hold due to the
investigation of possible competition issues around the acquisition by the
Office of Fair Trading. This investigation has now been satisfactorily completed
and it is anticipated that four dealerships will be disposed of before the end
of January 2007. The integration process will now continue and it is anticipated
that it will be completed in line with our original plan.

Enquiries:

Pendragon Plc
Trevor Finn,     Chief Executive         01625 725114
David Forsyth,   Finance Director

Finsbury Group
Gordon Simpson                           020 7251 3801


General

Ernst & Young LLP, which is authorised and regulated in the United Kingdom by
the Financial Services Authority for designated investment business, is acting
exclusively for Pendragon plc and for no one else in relation to the Transaction
and will not be responsible to anyone other than Pendragon plc for providing the
protections afforded to clients of Ernst & Young LLP or for giving advice in
relation to the Transaction or any other matter referred to in this
announcement.

The distribution of this announcement in certain jurisdictions may be restricted
by law and therefore persons into whose possession this announcement comes
should infirm themselves about and observe any such restrictions. Any failure to
comply with these restrictions may constitute a violation of the securities laws
of any such jurisdiction.

The information contained herein is not for publication or distribution in or
into the United States of America, Canada, Australia or Japan. These materials
are not an offer of securities for sale in the United States of America, Canada,
Australia or Japan. The securities referred to herein have not been and will not
be registered under the U.S. Securities Act of 1933 (the 'Securities Act'), as
amended, and may not be offered or sold in the United States absent registration
under the Securities act or any available exemption from registration. No public
offering of the securities referred to herein will be made in the United States.

Certain statements contained in this announcement constitute 'forward-looking
statements'. In some cases, these forward-looking statements can be identified
by the use of forward-looking terminology, including the terms 'believes',
'estimates', 'plans', 'prepares', 'anticipates', 'expects', 'intends', 'may',
'will', or 'should' or, in each case, their negative or other variations or
comparable terminology. Investors should specifically consider the factors
identified in this announcement which could cause actual results to differ
before making an investment decision. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors, which may cause the
actual results, performance or achievements of Pendragon or industry results, to
be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such forward-looking
statements are based on numerous assumptions regarding Pendragon's present and
future business strategies and the environment in which Pendragon will operate
in the future. These forward-looking statements speak only as at the date of
this announcement. Except as required by the Listing Rules, the Prospectus
Rules, the Disclosure Rules, the London Stock Exchange or applicable law, the
Company expressly disclaims any obligations of undertaking to release publicly
any updates or revisions to any forward-looking statements contained in this
announcement to reflect any change in the Company's expectations with regard
thereto or any change in events, conditions or circumstances on which any such
statement is based.


APPENDIX

Definitions

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

''Act'' or ''Companies Act'' . . . . . . . . . . the Companies Act 1985(as amended)

''Block Exemption rules''. . . . . . . . . . . . the European Commission Motor Vehicle 
                                                 Block Exemption (Commission Regulation 
                                                 (EC) No. 1400/2002)

''Deadlock Forced Sale'' . . . . . . . . . . . . the obligation on a shareholder in the 
                                                 Joint Venture Company to sell its shares 
                                                 to the other shareholder at the price 
                                                 offered by the other shareholder, which 
                                                 may arise in accordance with the deadlock 
                                                 resolution procedures more fully set out 
                                                 in the Circular

''Directors'' or ''Board'' . . . . . . . . . . . the directors of Pendragon whose names will 
                                                 be set out in the Circular

''Disclosure Rules'' . . . . . . . . . . . . . . the disclosure rules of the UKLA

''Existing Ordinary Shares'' or ''Existing
Pendragon Shares'' . . . . . . . . . . . . . . . ordinary share of 25 pence each in the capital 
                                                 of the Company

''Extraordinary General Meeting'' or
''EGM''  . . . . . . . . . . . . . . . . . . . . the extraordinary general meeting of the 
                                                 Company, notice of which (is/will be) 
                                                 set out in the Circular

''FSMA'' . . . . . . . . . . . . . . . . . . . . the Financial Services and Markets Act 2000, 
                                                 as amended

''Joint Venture Agreement''  . . . . . . . . . . a joint venture agreement relating to PPH0 
                                                 made between (1) PGSL (2) the Company and 
                                                 (3) NWPIL, dated 31 October 2005

''Leases'' . . . . . . . . . . . . . . . . . . . the leases entered into by the Group with 
                                                 PPH1 in relation to the Properties

''Listing Rules''  . . . . . . . . . . . . . . . the Listing Rules made by the UK Listing 
                                                 Authority under section 73A of FSMA

''London Stock Exchange''  . . . . . . . . . . . London Stock Exchange plc

''New Ordinary Shares'' or ''New
Pendragon Shares'' . . . . . . . . . . . . . . . the new ordinary shares of 5 pence each 
                                                 in the capital of the Company arising 
                                                 from the Share Split

''NWPIL''  . . . . . . . . . . . . . . . . . . . NatWest Property Investments Limited

''Official List''. . . . . . . . . . . . . . . . the list maintained by the UK Listing 
                                                 Authority

''Pendragon'' or the ''Company''   . . . . . . . Pendragon PLC

''Pendragon Group'' or the ''Group'' . . . . . . Pendragon and its subsidiary undertakings

''PGSL'' . . . . . . . . . . . . . . . . . . . . Pendragon Group Services Limited

''PPH0'' or ''Joint Venture Company''. . . . . . PPH0 Limited, a 50/50 joint venture
                                                 company (as defined by the Listing Rules) 
                                                 owned by PGSL and NWPIL

''PPH0 Group'' . . . . . . . . . . . . . . . . . PPH0 and its subsidiaries

''PPH1'' . . . . . . . . . . . . . . . . . . . . PPH1 Limited, a wholly owned subsidiary 
                                                 of PPH0

''Properties'' . . . . . . . . . . . . . . . . . the properties to be disposed of by the 
                                                 Pendragon Group as part of the Transaction

''Prospectus Rules'' . . . . . . . . . . . . . . the Prospectus Rules brought into effect 
                                                 on 1 July 2005 pursuant to Commission 
                                                 Regulation (EC) No. 809/2004

''RBS''  . . . . . . . . . . . . . . . . . . . . The Royal Bank of Scotland plc

''RegVardy'' . . . . . . . . . . . . . . . . . . RegVardy plc

''Shareholders'' . . . . . . . . . . . . . . . . holders of shares in the Company

''Share Split''  . . . . . . . . . . . . . . . . the subdivision of each of the Existing 
                                                 Ordinary Shares into five New Ordinary 
                                                 Shares of 5 pence each and consequential 
                                                 grant of a replacement authority for 
                                                 the Company to purchase its own shares

''Transaction''  . . . . . . . . . . . . . . . . the proposed transactions to be entered into 
                                                 by the Pendragon Group with or in 
                                                 relation to PPH0, in particular (i) 
                                                 the sale of the Properties, (ii) entering 
                                                 into the Leases, (iii) subscription for 
                                                 further equity shares, (iv) changes to the 
                                                 Joint Venture Agreement to include provisions 
                                                 under which Pendragon could in certain
                                                 deadlock situations be required to sell 
                                                 its interest in PPH0, and (v) other changes to 
                                                 the terms of the Joint Venture Agreement

''UKLA'' or ''UK Listing Authority'' . . . . . . the Financial Services Authority acting in its  
                                                 capacity as the competent authority for the purposes 
                                                 of Part VI of FSMA.

The terms ''subsidiary'' and ''subsidiary undertaking'' as used in these
definitions shall have the meanings given by the Act.

All references to legislation in this announcement are to the legislation of
England and Wales unless the contrary is indicated. Any reference to any
provision of any legislation shall include any amendment, modification,
re-enactment or extension thereof.

Words importing the singular shall include the plural and vice versa, and words
importing the masculine gender shall include the feminine or neutral gender.

References to ''£'', ''sterling'', ''p'' and ''pence'' are to the lawful
currency of the United Kingdom.




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