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NSF expects to convince CMA to approve hostile takeover of Provident Financial

NSF said recent statements made by Provident were “irresponsible”.

NSF's hostile bid for Provident has turned into a war of words between the two

Non-Standard Finance PLC (LON:NSF) expects to reach an agreement with the UK competition watchdog to remedy concerns regarding its proposed takeover of Provident Financial PLC (LON:PFG) at the initial phase of the review process.

Doorstep lender NSF, which is run Provident’s ex-boss John Van Kuffeler, launched an unsolicited £1.3bn bid to buy its rival earlier this year.

READ: NSF accuses takeover target Provident Financial of trying to stoke 'unwarranted fear'

In February, the UK Competition and Markets Authority said Provident and NSF would have to delay combining after any deal to protect employees and customers while it considers the possible impact of a merger.  

The regulator served the companies with an initial enforcement order, which is used to stop businesses from integrating until it decides if it needs to investigate a deal.

NSF expects to win over CMA

“We fully expect to reach an agreement in principle on an appropriate remedy with the CMA during the initial Phase I review process,” NSF said on Monday.

“If the CMA’s approval has not been received by the date on which all other conditions to the offer are satisfied, NSF will have a decision as to whether or not to waive the CMA condition and proceed to completion."

Provident makes 'irresponsible' statements, says NSF

NSF also said recent statements made by Provident were “irresponsible”.

On Friday, Provident said NSF has only secured 2% of incremental acceptances from Provident shareholders since the bid was launched, beyond those that had already committed to support the deal at the time it was put forward.  

Provident believes that is a “clear signal that the offer has significant flaws” and again urged shareholders to vote against the proposed bid.

Schroders, which has a 14.6% stake in Provident, has said would not accept NSF’s offer as it does not believe it is in the best interest of shareholders.

However, shareholders, Woodford, Invesco and Marathon have indicated they would support the deal.

Provident has argued that it is on track to turn around its performance after suffering profit warnings, a sharp fall in its share price and regulatory fines in recent years.

The group has told investors that it aimed to deliver a full-year return on assets of 10% (consistent with a return on equity of between 20% - 25%), receivables growth of between 5% and 10% per year, maintain dividend cover of at least 1.4 times and a “sensible” buffer over the Prudential Regulation Authority’s total capital requirement.

NSF says Provident board has 'run out of ideas'

NSF said on Monday that the performance targets Provident has laid out were a sign that the board has “run out of ideas”.

“This behaviour underlines our concerns about a Provident board, which has presided over: huge value destruction; plummeting profits, a repetitive cycle of reassurances followed by profit warnings; widespread and serious regulatory mismanagement resulting in harm to customers and subsequent redress; and an apparent disregard for the views of some of its major, and longest-suffering, shareholders.”

Quick facts: Provident Financial

Price: 426.3 GBX

Market: LSE
Market Cap: £1.08 billion

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