Major shareholder snubs £1.3bn hostile takeover of Provident
Bradford-based subprime lender Provident Financial has received the backing of a major shareholder against the £1.3bn hostile takeover bid by Non-Standard Finance.
Schroders, which holds a 14.6% share of Provident, has said it will not be accepting NSF’s offer for the lender. They stipulated that they have no holding in Non-Standard Finance.
In a letter posted by Provident this morning, Schroders fund manager Kevin Murphy said that the takeover was “not in the best interest” of Provident shareholders.
He said that while Provident Financial Group (PFG) had faced a number of issues in recent years, its recent Q1 trading update made it clear that “it is on track with its recovery and rehabilitation”.
Murphy said that NSF’s bid risks “destabilising” this recovery, and that by issuing a deadline for acceptances that falls before the outcome of the Competition and Markets Authority investigation is known, NSF is forcing Provident shareholders to underwrite any costs of redress “blindly”.
He said: “NSF faces a number of operational and regulatory challenges, including an FCA investigation of its guarantor lending business.
“We do not believe the shareholders of PFG who are also collectively majority shareholders in NSF (namely Woodford, Invesco and Marathon) should be seeking to impose the challenges of the latter company on the former.
“We are concerned that the right of minority shareholders are not being protected, and that this represents poor stewardship.
“In our view, the best interest of PFG shareholders would be best served by the existing management continuing to execute on their recovery plans.”
Provident also announced this morning that it had undertaken a further detailed review of NSF’s historical financial disclosures, and warned shareholders against supporting the deal. It said that NSF had “an overly positive perspective” of its own headline financial performance, pointing out that NSF had made statutory losses since incorporation.
Provident said: “The Provident Board has serious concerns about the underlying financial and operating performance of NSF and whether the current market capitalisation is a true reflection of the fundamental value of the NSF Group.
“Given all of this, and the Board’s belief that the NSF Offer has significant flaws and would be value destructive, the Provident Board continues to urge its shareholders to take no action in relation to the Offer.”
NSF initially made an offer for Provident in late February. Since then it has been discussing the takeover with the Competition and Markets Authority, and faced major opposition from within Provident.
“Last week it extended its offer deadline to 15 May, so it has time to garner support for 50% of Provident’s shareholders. Schroders’ comments today indicate that this will be much harder to achieve than NSF had initially thought.
In April, Provident chairman Patrick Snowball urged shareholders to take action over the takeover, and it now appears a large portion have been won over.
In March this year the company reported pre-tax profits had significantly increased, up 82% to £153.5m in 2018. It said that it had made “immense progress” in turning the business around.
