Takeover bid becomes more hostile as rivals battle over shareholder support

The board of Bradford-headquartered Provident Financial has this morning warned shareholders that they should not accept the £1.3bn “unsolicited” and “risky and flawed” offer by its rival Non-Standard Finance (NSF) which was submitted last month; while NSF urged shareholders to “accept the offer without delay” as it claims Provident is “still adrift without a coherent strategy or an effective management team.”

The Provident Board this morning reiterated its belief that rival NSF’s £1.3bn offer “is not in the best interests of all Provident Shareholders” – stating it was “risky and flawed.” The hostile takeover was first announced last month. 

The subprime lender said: “It is strategically and financially flawed and presents significant risk in terms of both execution and shareholder value. The Provident Board is committed to maximising value for all Provident Shareholders and will explore all appropriate alternatives to achieve this objective.”

It comes as Proivoident Financial this morning announced two management team and board appointments. This included the appointment of Neil Chandler as new Managing Director of Vanquis Bank. Chandler will join the Vanquis Bank Board and start on 15 April. The firm also announced Robert East as Non-Executive Director of Provident Financial and Chair of Vanquis Bank; and Graham Lindsay as Non-Executive Director.

NSF was quick to respond to the circular, with CEO John van Kuffeler, stating: “The Provident Board has failed to present a credible vision for Provident, demonstrating that the company is still adrift without a coherent strategy or an effective management team. Malcolm Le May, who let down Provident shareholders in his almost four years as senior independent director, is now running the company and shareholders will be asking what this says about the current Board.

“To compound this, the Provident Circular has named two new directors and, while they purport finally to bring much-needed sector experience to Provident, sadly this has most recently been in overseeing the final stages of collapse at Cattles and Wonga, respectively. Shareholders will be wondering how “specialists in failure” will help solve the problems which are blighting Provident and restore shareholder value.”

Provident Financial said the NSF proposal has “significant flaws and would have long-lasting, detrimental consequences for Provident Shareholders and customers.” It added that NSF had not undertaken transactions of this size and complexity and its track record is “one of significant value destruction.”

Provident added that it had been delivering on the objectives set out in early 2018 which included resolving material outstanding regulatory issues with the FCA, providing sound foundations for future growth and value creation, and strengthening its board governance and structure.

Provident added: “Provident’s results for 2018 are testament to the successful turnaround the group has made over the past 18 months, having delivered growth of 82.3 per cent in 2018 on a pro forma IFRS 9 basis, and a final dividend of 10 pence per share.

“Provident has a clear strategy to deliver attractive and sustainable shareholder returns and good customer outcomes in an evolving industry and regulatory environment by implementing a number of planned growth and efficiency initiatives across each of the divisions.”

The firm added: “The Provident Board strongly advises all Provident Shareholders to take no action in relation to the risky and flawed NSF Offer.”

Patrick Snowball, Chairman of Provident said: “The Provident Board believes that NSF’s hostile Offer represents an irresponsible approach in the context of a regulated business which is emerging from a period of substantial instability. As such, the Offer would have a negative and destabilising impact on Provident stakeholders, including its customers, for a considerable period of time.

“The Provident Board believes that the Offer would be value destructive and that the arguments put forward by NSF do not take into account the significant operational progress made by Provident’s management team. Accordingly, the Provident Board unanimously believes the Offer is not in the best interests of Provident Shareholders or customers and should be firmly rejected.”

Malcolm Le May, Chief Executive Officer, Provident Financial added: “Having stabilised the group, the management team is in the process of developing and implementing a number of planned growth and efficiency initiatives across each of its divisions. We are at an inflection point for the group, as customer needs are changing, the digital business models are challenging old operating approaches, and the regulatory environment is constantly evolving. The Provident Board believes that Vanquis Bank will be the biggest part of the group and its ability to maximise the value in the crossover of its customers with Moneybarn will be important going forward. Against this backdrop, we have a clear strategy and vision for the group and its divisions.”

NSF issued strong words in response to the circular. 

The firm said: “In the Provident Circular and the recent results announcement and annual report, Provident’s Chairman and Chief Executive both lauded their successes despite issuing a profit warning only two months ago, the third such profit warning in just over 18 months. The Provident Circular represents a continuation of this misplaced optimism: growth is underwhelming, customers and management are leaving, central costs are rising and numerous regulatory issues still exist across the Provident group. 

#”We therefore urge shareholders to accept our Offer without delay so that we can get on with the job of ending this difficult period for Provident by restoring the business culture, fixing Provident’s self-inflicted problems and unlocking substantial value for shareholders.”

NSF said that the Provident Board was “still searching for the coherent strategy that they have consistently failed to develop, let alone deliver, over recent years.”

NSF added: “Our view is that the Provident Circular is a further example of the Provident Board yet again failing to articulate a decisive plan for resolving Provident’s problems or any kind of clear vision for Provident’s future. With over a month having passed since we announced our Offer, the only slim hope offered by the Provident Board, that they would “explore all appropriate alternatives”, appears to have faded.”

Van Kuffeler added:  “The front page of the Provident Circular tells shareholders not to allow their company’s future to be put at risk. I couldn’t agree more. With Provident being led by a management team with no credible vision for the future and by a CEO who has let down Provident shareholders as senior independent director, executive chairman and CEO, we urge the Provident shareholders to accept our Offer without delay so that we can get on with the job of fixing and de-risking Provident’s problems, restoring its business culture and unlocking substantial value through the execution of our transformation plan.

“Our Offer will create a leading non-standard finance group with strong positions in all four main segments of the sector and a management team with significantly more relevant experience than that of Provident (even following Provident’s addition of two directors fresh from the failures at Cattles and Wonga). We believe our Offer and our proposed strategy will again deliver good customer outcomes and improved returns to all shareholders, which is why, as previously announced, we already have such substantial shareholder support.”

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