Sky News has learnt that Alpha Auto Group, a privately owned Canadian car dealer network, has agreed a deal to buy its British peer.

One City source said a deal was likely to be announced as early as Tuesday.

The takeover of Lookers, which is expected to value it at approximately 120p-a-share, will be pitched at a substantial premium to its closing price on Monday of 88.7p.

It is understood that the bidding vehicle is called Global Auto Holdings Limited.

The Canadian company was founded in 2014, and has seven sites in the US, as well as 10 in its home market.

It has agreements with manufacturers including Audi, Ford, BMW, Toyota and Mercedes.

Lookers, which trades from about 150 sites, traces its history back to 1908, when it was founded by John Looker.

The business was established in Manchester and initially sold bicycles, parts and - occasionally - used cars.

It was appointed a distributor of Austin motor vehicles in 1918, and its founder retired just over a decade later.

Lookers eventually floated on the London Stock Exchange in 1973, and now sells cars made by Jaguar, Kia and Maserati, among others.

Its future was thrown into doubt three years ago when Lookers became embroiled in an accounting fraud, sparking an inquiry by the Financial Reporting Council.

The company was forced to suspend trading in its shares, and eventually revealed a £45.5m loss for 2019.

With sales hammered by the COVID pandemic and its dealerships shut, Lookers' rival, Pendragon, approached it with a merger proposal.

That was rejected by Lookers, which has recently seen sales experiencing a strong rebound.

Pendragon has itself been at the centre of protracted bid speculation, with talks about a takeover by its biggest shareholder having ended several months ago.

In March, Jardine Motors' owner agreed to sell the business to Lithia Motors, an American car dealer group.

The sudden spurt of overseas interest in the UK car dealership sector may be viewed as oddly timed given the financial pressures facing British households.

However, many analysts believe listed UK dealers are relatively cheap and are likely to benefit from industry consolidation.

Lookers and Alpha Auto Group declined to comment on Monday.