March 6, 2019 / 8:02 AM / 3 months ago

Provident puts Vanquis at heart of $1.7 billion hostile bid defence

(Reuters) - Provident Financial Plc stood its ground against a hostile 1.3 billion pound takeover bid by smaller rival Non Standard Finance Plc on Wednesday, saying it will focus on growing its banking business.

Vanquis Bank, headquartered in the heart of London’s historic financial district, has 1.8 million customers and accounts for more than half of Provident’s revenue.

The British subprime lender repeated a call to investors to reject a nil premium takeover bid launched by Provident’s former CEO and said it had a clear plan to map out growth and enhance performance across its divisions.

NSF said Provident’s statement “simply tells long-suffering Provident shareholders that they will get more of the same from an inexperienced team”, adding it had board members who were experienced in running a bank.

Provident, known for giving credit to people who do not meet the lending criteria of mainstream lenders, has been trying to revive its flagging share price after a mishandled restructuring of its home credit business, profit warnings, the loss of top management and the suspension of its dividend in 2017.

Canaccord Genuity analysts said they saw nothing in Provident’s defence to shake their view that the offer by NSF, set up only five years ago, was the best option for investors.

NSF’s offer has the backing of investors Neil Woodford, Invesco and Marathon who together hold over 50 percent of both NSF and Provident, which has also been under investigation by Britain’s financial watchdog.

Provident’s chief executive Malcolm Le May said it was firmly on the front-foot once more, and saw a bright future as a bank rather than a subprime lender, adding that a merger with NSF was “fraught with regulatory risk”.

“We are a banking and credit card business and we are PRA (Prudential Regulation Authority) regulated. We (have) built a board now which is essentially a bank board, not a home credit board ... I think that’s an important feature of the future.”

Provident’s shares, which have risen by more than 16 percent in the days since NSF’s offer, were little changed at 597.8 pence at 1218 GMT.

NEW DEAL?

Provident, which last year raised 169 million pounds from shareholders to compensate customers after an investigation into its Vanquis Bank Repayment Option Plan, said it had resolved outstanding regulatory issues and strengthened its relationship with customers, regulators and other stakeholders.

It will shortly name a managing director and chairman with retail banking and consumer finance experience for Vanquis Bank, it said, adding it needs to work more closely with regulators.

The firm also said its car financing unit Moneybarn had made significant progress with the Financial Conduct Authority (FCA) on the redress payable after an inquiry into affordability.

“I am trying to either persuade shareholders that we should carry on as is ... or make sure I find a solution that improves the deal for them,” Le May said.

Provident said its consumer credit unit (CCD) had started a voluntary redundancy programme which was expected to reduce headcount by about 200 in CCD’s central support functions.

Le May did not comment on further job or cost cuts, but said there were “significant” cost challenges ahead.

Reporting by Noor Zainab Hussain in Bengaluru; Editing by Sinead Cruise/Alexander Smith and Emelia Sithole-Matarise

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