Provident Financial goes on the attack in takeover battle

Provident Financial has launched a detailed and robust rebuffal of Non-Standard Finance’s (NSF) £1.3bn takeover bid as it attempts to influence shareholders to back the existing board.

The Bradford-based subprime lender has endured a torrid couple of years, although now has a different management team in place. 

Former Provident Financial chief executive John van Kuffeler left his role to set up NSF five years ago, and has quickly built the business into a rival – and potential owner – of Provident. NSF says it has the support of more than 50% of Provident’s shareholders.

Provident has now unveiled its growth plan and announced that NSF’s offer “should be firmly rejected” as it is not in the best interests of Provident’s shareholders.

The board of Provident also voiced their concerns over “operational and execution risks” due to what they identify as the changing regulatory environment, NSF’s track record of value destruction and NSF’s limited experience across all of Provident’s businesses.

Patrick Snowball, chairman of Provident, said: “Its offer undervalues Provident, has major strategic flaws, contains a number of misguided assumptions about the Provident business and includes future plans which we consider to be fraught with execution risk and which, as NSF themselves state, are subject to a post-completion review.

“The existing management team has stabilised the business in a very turbulent period over the past 18 months, which has required addressing managerial mistakes of the past, and now has a clear strategy for delivering attractive returns to shareholders.

“Now is not the time to be distracted from delivering on the potential of the Group for all of our shareholders by an unattractive offer, which reveals a lack of commercial logic and regulatory understanding and would have significant execution risk.”

In January, shares at Provident Financial dropped by nearly 20% in trading – wiping £320m from its market value. The drop came after the firm said it expected its full year results for 2018 to be on the “lower end” of market expectations.

Provident, however, has said that the business can be turned around through a “clear plan to maximise value for all Provident shareholders by executing its strategy to deliver growth and attractive returns through its complementary, synergistic and industry leading businesses.”

The management team at Provident is currently in the process of developing and implementing a number of planned growth and efficiency initiatives across each of the Group’s divisions. The Board believes these will further underpin its ability to deliver shareholder returns.