Car dealership Pendragon has said it held talks with rival Lookers over a potential merger but failed to secure a deal.

Shares in the company slipped after it said its discussions over the move have now “ceased”.

The firm told investors that it held talks with Lookers over the potential benefits of a combination, after the news was first reported by Sky News.

The broadcaster had reported that Lookers snubbed the tentative merger proposal from its competitor.

Pendragon said the talks collapsed despite believing that “such an exploration would have proved beneficial”.

The car retailer, which runs Evans Halshaw dealerships, said it is well positioned financially having “taken significant steps to reshape the business and to cut costs”.

Last month, it cut the pay of its senior executives as part of measures to mitigate the impact of the coronavirus outbreak.

The company said it also furloughed around 80% of its staff for at least 21 days.

The coronavirus outbreak comes after an already testing period for Pendragon, with the company shaking up its leadership team earlier this year after warning over profits.

Meanwhile, rival Lookers is currently in the midst of an investigation by the UK Financial Conduct Authority over possible fraudulent activity.

In April, Lookers said certain non-cash balance sheet accounts had not been fully reconciled in some operating divisions and, as a result, it would take an impairment charge of £4 million in its 2019 accounts.

Shares in Pendragon moved 3.8% lower at 7.9p in early trading.