Non-Standard Finance PLC’s (LON:NSF) acquisition of Provident Financial PLC (LON:PFG) faces a competition probe over its potential impact on the home credit market.
UK competition watchdog the CMA suggested the deal will significantly lessen competition in this part of the sub-prime debt market and as a remedy NSF might have to de-merge its Loans-at-Home business.
The CMA said it will now carry out a 40-day Phase 1 investigation into the potential merger with interested parties invited to comment
NSF has already flagged up the possibility of splitting off Loans At Home and listing it separately, and said it was confident of reaching an accommodation with the CMA during the phase 1 review period.
The lender’s offer has already been declared unconditional even though it received little backing other than from shareholders who also hold a major stake in NSF.
Provident Financial’s management has been fighting tooth and nail against the takeover.
Today, they said there was no way that the CMA investigation would be concluded by the 5 June date set for the offer to go wholly unconditional.
They also questioned whether Loans at Home would be able to operate effectively as a stand-alone business and how it would be affected by proposed changes to the use of self-employed workforces.
“The Provident Board believes that this is a very significant development, introducing a far greater degree of uncertainty for the NSF Offer than previously indicated by NSF.”
Provident Financial said the takeover offer should lapse until the CMA probe is finished.
Two prominent fund managers – Schroders and M&G – have said recently that they will remain as minority investors in Provident Financial rather than accept the NSF deal.
NSF, who has received acceptances for its all-share offer from 53.5% of Provident shareholders, has reduced the level of acceptances required to declare the offer unconditional down to 50% from 90% initially.