Credit lender Provident Financial has stood its ground against a takeover bid by rival Non-Standard Finance (NSF) and raised new concerns about the strategic, operational and financial merits of the offer.
NSF is attempting to take over its larger rival with a £1.3bn bid as Bradford-based Provident attempts to recover from 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 has the backing of the holders of just over 50 per cent of Provident’s shares. That is well short of its 90 per cent target and a marginal improvement from when it first made the bid in February.
The acceptance condition for the offer is currently not less than 90 per cent, but NFS can vary the level and said further announcements on this will be made in due course.
The bid has the backing of fund investors Neil Woodford, Invesco and Marathon, who together hold over 50 per cent 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 defence against the bid, as well as how it could persuade competition regulators to approve a plan to list its Loans at Home unit separately.
Analysts at Goodbody said: “Provident has clearly done some detailed digging and raises some serious questions regarding the legality of the historical ordinary dividend distributions made by NSF."
NSF has proposed simplifying Provident, selling two units and demerging Loans at Home.
Goodbody analysts added: “While the statement was probably designed to create momentum, inspiring other shareholders to accept the offer, we don’t believe that it achieves this."
Mr van Kuffeler said: "We are delighted to have received acceptances for a majority of Provident's shares.
"This represents a clear validation of the experienced NSF management team and of our transformation plan to unlock substantial value for shareholders, as well as providing us with a platform to complete this transaction and get on with the job of implementing our plan."
But Provident insisted it is continuing to explore "all appropriate alternatives" to maximise value for shareholders and continues to advise its shareholders to "take no action".
It added: "The Provident board continues to have very material concerns about the strategic, operational and financial merits of the NSF offer and is keen to ensure that all of its shareholders, including those that do not have a shareholding in NSF, have full clarity with respect to the terms and implications of the NSF offer."
Analyst James Hamilton at Numis said NSF's announcement on the level of acceptances suggests that "no new, significant shareholders have joined the offer group".
Separately, Provident said chief financial officer Simon Thomas is to take three months leave for a heart operation, naming former PwC partner and hostile takeover specialist Tony Skrzypecki as his stand-in.