Blackfriar: At least the Provident/ NSF battle has an end date - unlike Brexit

Every day the two sides sling insults at each other in an increasingly bitter takeover struggle.

Fortunately, unlike Brexit, the end is in sight as NSF’s £1.3bn hostile takeover bid for Provident goes unconditional at 1pm on May 15. Investors in Provident have to register acceptances for the deal by then, a deadline that will not be extended.

On Wednesday, Bradford-based Provident hit back at NSF saying that it faces significant headwinds and it may have to raise fresh capital.

In a swift retaliation, NSF dismissed suggestions it would have to raise capital if the sub-prime lender succeeds in its takeover bid for Provident.

NSF chief executive John van Kuffeler, described Provident’s assertion as “complete nonsense”.

“Any suggestion of an NSF capital raise or weakness in its financial performance is complete nonsense, and rich coming from Provident,” he said.

“Unlike Provident, NSF has not needed an emergency capital raise and does not have a recent history of three profit warnings, the last being only in January.”

The fresh outbursts come a day after Provident’s third-largest shareholder, Schroders, refused to support NSF’s hostile bid.

In a letter to Provident’s chairman Patrick Snowball, Schroders said: “Schroders does not believe that NSF’s offer is in the best interest of Provident shareholders ... NSF’s bid risks destabilising this recovery, and brings additional regulatory risks and uncertainty.”

So where do the two sides go from here?

Analyst Ian White at Autonomous said Provident’s claim that a combination with NSF would present significant risks around capital for the combined group are valid.

Mr White agrees with Schroders that by issuing a deadline for acceptances that falls before the outcome of the CMA investigation, NSF is forcing Provident shareholders to underwrite any costs of redress blindly.

“We would agree with these views,” said Mr White.

“However, with the offer enjoying the support of more than 50 per cent of Provident shares, it remains to be unseen whether the opposition of other large holders will be sufficient to prevent the deal from going ahead.”

Mr White said he is not surprised to see the rhetoric from both firms increasing as the revised closing date of NSF’s offer approaches.

“We now view risks around the bid, as well as the fees already incurred by Provident in defending against it, as weighing too heavily against a valuation-driven bull case around the stock. We would continue to encourage shareholders to reject NSF’s offer,” concluded Mr White.

Analyst John Cronin at Goodbody said Schroders’ public opposition to the deal could now build momentum, providing impetus for other Provident shareholders to reject the offer. He added that Provident’s latest announcement and the rebuttal by Schroders will be a blow to NSF.

While the Schroders rejection means the acceptance condition of 90 per cent can no longer be met, NSF could go for a scheme with 75 per cent acceptances or waive the acceptance condition and declare the offer unconditional.

Mr Cronin said: “NSF currently has acceptances of 51.3 per cent but we believe this is likely too low a threshold to declare the offer unconditional as to acceptances.”

At least we only have six more days for the saga to conclude. I wish the same could be said for Brexit.