(Reuters) - British sub-prime lender Provident Financial stood its ground against a hostile bid by smaller rival Non-Standard Finance on Tuesday, raising new concerns about the strategic, operational and financial merits of the offer.
Non-Standard Finance (NSF) has been trying to buy its larger rival with a 1.3 billion pound ($1.7 billion) bid as Provident battles to recover from a string of setbacks, including a botched restructuring of its home credit business, profit warnings and a dividend suspension.
NSF, whose bid is led by Chief Executive John van Kuffeler, a former CEO of Provident, said on Tuesday it had the backing of the holders of just over 50 percent of Provident’s shares. That is well short of its 90 percent target and a marginal improvement from when it first made the bid in February.
The bid has the backing of fund investors Neil Woodford, Invesco and Marathon, who together hold over 50 percent of both NSF and Provident, but has repeatedly been opposed by Provident as not in the interest of remaining shareholders.
In another detailed response on Tuesday, Provident asked how NSF would address the potential funding, ratings, balance sheet and earnings impacts from its planned sale of Provident’s Moneybarn, while still achieving a “meaningful capital distribution”.
“The Board of Provident has specific concerns regarding certain historical dividend payments and share buybacks made by NSF,” Provident said in a statement.
It questioned who NSF would put at the head of Vanquis Bank, which is at the heart of Provident’s defense against the bid, as well as how it could persuade competition regulators to approve a plan to list its Loans at Home unit separately.
“PFG (Provident) has clearly done some detailed digging and raises some serious questions regarding the legality of the historical ordinary dividend distributions made by NSF,” Goodbody analysts said.
NSF had proposed simplifying Provident, selling two units and demerging Loans at Home.
Provident shares rose as much as 2 percent to 527.4 pence on Tuesday, while NSF shares were largely unchanged.
(Graphic: NSF launches hostile bid for bigger, struggling rival - tmsnrt.rs/2WFeOFT)
“While the statement was probably designed to create momentum, inspiring other shareholders to accept the offer, we don’t believe that it achieves this,” Goodbody analysts added.
Separately, Provident said Chief Financial Officer Simon Thomas was taking three months leave for a heart operation, naming former PricewaterhouseCoopers partner and hostile takeover specialist Tony Skrzypecki as his stand-in.
Reporting by Noor Zainab Hussain and Pushkala Aripaka in Bengaluru; editing by Patrick Graham and Susan Fenton