Sub-prime lender Provident Financial Group has rejected a £1.3bn bid from smaller lending group Non-Standard Finance (NSF), calling it an “irresponsible” approach.
The bid was made on Friday evening by NSF boss John van Kuffeler, who was previously Provident’s chief executive and chairman of Provident Financial.
NSF said a prospective deal was backed by more than 50% of Provident’s shareholders, including Neil Woodford, investment fund Invesco and Marathon.
NSF had proposed the selling off of sub-prime car finance lender Moneybarn, as well as the sale or closure of other parts of Provident’s business including retail loan firm Satsuma and its Loans at Home business.
In its rejection notice, Provident said the Board did not believe that disposing of Moneybarn “at this point in the economic cycle would maximise value for shareholders”.
It wrote: “The Board also believes that the proposed disposal fails to recognise the strong financial performance of Moneybarn and synergistic benefits with Vanquis, as well as the potentially significant consequences for the Group’s capital structure and funding profile.”
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Provident also questioned the ability of NSF to lead the company in a wide-ranging note that cited NSF’s smaller size, its share price returns and regulatory experience.
Malcolm Le May, chief executive officer of Provident Financial said: “The management team has made substantial strides in restoring stability, improving the company’s regulatory position and enhancing its internal culture with a focus on customer outcomes. This further prolonged period of business and regulatory uncertainty could negatively impact stakeholders, including customers and employees, and is not in the best interests of the Company.
“We have a clear vision for a financial services group serving the interests of some of the most vulnerable individuals in our society, with a broad product offering and distribution model aligned with changing consumer behaviours and their increasing use of digital technology. At the same time, we are implementing the most up-to-date regulatory standards, which we anticipate will be seen as a blueprint for the Home-Collected and High-Cost, Short-Term Credit sectors.
“We are focused on executing the clearly defined strategy to restore profitability in CCD, improving growth and profitability in Vanquis, as a well capitalised regulated bank, maintaining the strong performance of Moneybarn and maximising the synergies across the whole group to deliver value for all shareholders.”
Provident’s Consumer Credit Division saw trouble begin last year, when the company’s managing director stepped down following a profit warning.
The problems originally stemmed from the decision to shift from part-time external debt collecting agents to a full-time, in-house team, which drove up costs. The potential loss faced by CCD was recently put by Provident at £120m.
The group’s position has been complicated by two investigations launched by the Financial Conduct Authority (FCA) into Moneybarn and the group’s credit card business, Vanquis.
Provident recently undertook a major restructuring exercise among its executives, and appointed Malcolm Le May as chief executive near the start of 2018.
A few days before the reshuffle, it had been reported that four former executives, including the former managing director of CCD, Andy Parkinson, were suing Provident for unfair dismissal.