Provident Financial mulls over £1.3 billion offer from rival

The troubled British sub-prime lender is weighing up a £1.3 billion offer from its smaller peer Non-Standard Finance.

Trader Source: Bloomberg

Provident Financial told its shareholders to take no action, following an offer from its smaller rival Non-Standard Finance (NSF) on Friday.

In a short statement to shareholders, the British sub-prime lender said that it would release a ‘considered response’ to the offer made by its rival in due course.

Non-Standard Finance looks to acquire troubled rival

On Friday morning, NSF announced its takeover offer that valued its larger rival at £1.3 billion in move that would see the newly formed entity become the largest UK home credit provider in terms of market share.

The offer values each Provident Financial share at 511p.

‘We have recognised the strong logic and value creation potential of a combination with Provident for some time and hence approached the Provident board with a proposal in January last year,’ NSF Founder and CEO John van Kuffeler said about the offer on Friday.

‘I'm delighted holders of over 50% of Provident's shares have given their support to our proposal today,’ he added.

Following the news of the offer, Provident Financial’s share price climbed 4.4% on Friday morning to £5.34, with NSF’s share price rising more than 7%, hitting 62p.

NSF acquisition could revitalise Provident Financial

Last year was a tough period for Provident Financial, with the sub-prime lender completing a £331 million rights issue in April 2018 that helped the company bolster its balance sheet, after its doorstep lending business suffered heavy losses following a botched reorganisation in 2017.

However, the £1.3 billion merger with NSF could help revitalise Provident Financial with the two benefitting from greater cost-savings, revenue synergies and lower costs of capital.

The deal will not only provide shareholders with a short-term gain that has already been reflected by the increase in share price for both companies but will likely lead to greater capital returns to shareholders over the long-term.


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