UK subprime M&A party closed to gatecrashers

Aimee Donnellan –

Britain’s subprime M&A party is closed to gatecrashers, yet nobody seems to have told investors in Provident Financial. Shares in the UK lender are trading more than 10 per cent above much smaller rival Non-Standard Finance’s hostile £1.2 billion bid.
Given that over 50 per cent of Provident shareholders have accepted the deal on the table, any white knight has probably left it too late.
Earlier this month NSF Chief Executive John van Kuffeler announced he had secured the minimum support required to get the deal over the line.
Still, some Provident investors are not convinced the battle is over. One of the company’s largest shareholders reckons another bidder could take a punt, or that NSF could sweeten its offer.
That optimism is evident in market prices. NSF is offering 8.88 of its shares for each Provident share, valuing the target at 467 pence per share based on Thursday’s closing price.
Yet Provident shares closed at 522 pence. That’s unusual: target companies typically trade at a discount to hostile offers.
Although van Kuffeler has the support he needs to claim victory, he is aiming to get shareholders representing 90 per cent of the company onside.
The remaining Provident investors could hold out and demand an even bigger chunk of the combined group than the 88 per cent they are set to receive. However, if NSF hands over more of its shares to Provident, its own share price would probably suffer, cancelling out the benefit of any sweetener.
Regulators could still scupper the deal. Britain’s competition watchdog could block it if NSF is unable to demerge part of the combined business. Meanwhile, the Financial Conduct Authority has raised the alarm about NSF’s plan to reintroduce incentives for Provident’s agents.
Assuming NSF can overcome these hurdles, it remains in a strong position to declare victory. The all-share takeover is effectively a way to replace Provident’s management team. If van Kuffeler does not deliver, shareholders will always have the option of selling out to another bidder later.
For now, however, that door looks closed. — Reuters