Subprime lender Provident Financial PLC (LON:PFG) shares rose in early deals Friday after it received a takeover offer from Non-Standard Finance PLC (LON:NSF), a consumer finance provider headed by its ex-chief executive John van Kuffeler.
The all-share deal, which values FTSE 250 Provident at around £1.3bn, has been backed by one of its major shareholders Woodford Investment Management, which owns a 25.3% stake in the company and is headed by high-profile fund manager Neil Woodford.
READ: Provident Financial slumps as credit card division weighs it down once again
Other shareholders backing the bid are Invesco and Marathon Asset Management, which in combination with Woodford, own over 52% of the company.
Perhaps not so surprising is that Woodford, Invesco, and Marathon also own large stakes in NSF of 26.8%, 28.5%, and 10.7% respectively.
On a per share basis, the offer values each Provident share at 511p, equal to its last close price on 21 February, with Provident’s shareholders owning around 88% of the newly enlarged group post-transaction.
Kuffeler, a descendant of Belgian nobility who has spent around 27 years in the sub-prime sector, founded NSF in 2014 following his departure from Provident after 22 years at the helm.
In a response to the offer in mid-morning, Provident’s board said it had noted the offer and would announce its response “in due course”, encouraging shareholders to take no action.
12 months of misery
Provident has been rocked over the last 12 months after its credit card unit Vanquis Bank was hit with a £172.1mln fine last year relating to its repayment option (ROP) plan after an investigation from the Financial Conduct Authority (FCA).
READ: Provident Financial launches big rights issue after £172mln credit card bill
The hefty bill, coupled with a massive swing to a £123mln loss in 2017 from a £343.9mln profit the year before, meant the firm had to go cap in hand to investors for a whopping £300mln in a steeply discounted rights issue in order to stabilise its finances.
Vanquis was still giving Provident a headache in January after regulations increased minimum repayments and helping struggling customers figure out repayment plans meant impairment on some loans had been “higher than expected”.
As a result, the company had said profits for the latest financial year would be “the lower end” of its previous range of between £151-166mln.
In a note to clients, analysts at Peel Hunt said that their prime concern over the deal was the execution risk of “extracting value given a period of economic uncertainty” which could have knock-on effects within the unsecured lending sector as well as reducing the sale value of the company’s non-core assets.
In mid-afternoon trading, shares were up 12.2% at 573.8p.
-- Adds Provident response to offer and updates share price --