Provvy deal sparks £44m fees bonanza

City advisers to cash in from bitter takeover tussle

BANKERs, lawyers and spin doctors are in line to pocket as much as £44m from the hostile takeover battle for doorstep lender Provident Financial.

the staggering fees are equal to over a quarter of the £154m value of Non-standard Finance (NsF), which is trying to buy its much larger rival, the Provvy.

the value of NsF has plummeted since January when the initial euphoria of the proposed deal sent its shares up to 67.1p. Last night they closed down 4.7pc, or 2.4p, at 49.1p – an all-time low.

the fall came as analysts warned that the bid was struggling to win over investors, and could be scuppered by the City watchdog.

Russ Mould, of trading firm AJ Bell, said: ‘these fees may just be the standard rate but they’re something every shareholder will look at very carefully. it’s a big number relative to the market cap of NsF.’

the fees owed by NsF alone will be as high as £22.3m, with up to £10.9m going to its investment bankers Deutsche Bank, Ondra and shore Capital.

the lawyers working for NsF will get as much as £9.3m, the accountants will be given £1.3m, and its public relations company will get up to £500,000.

Meanwhile, Provident’s defence costs will be up to £22m, including as much as £15.8m for its bankers JP Morgan, Jefferies and Evercore.

the sums involved are a world away from the incomes of the two companies’ 2.6m customers, who are some of the poorest and most vulnerable borrowers in the country.

there is growing speculation in the City that the deal could fall through because of concerns held by the Financial Conduct Authority (FCA) watchdog.

NsF is run by John van Kuffeler, who previously was in charge of the Provvy for 22 years and says he can transform its fortunes following a share price slump.

But he left the Provvy in 2013, before tough new regulations were introduced by the FCA.

the watchdog has written to NsF warning it that any attempt to exploit customers for a higher profit will not be tolerated – a message which FCA boss Andrew Bailey repeated to the Mail this week. Analysts at Goodbody have now said investors may shun the deal over fears the regulator could bar van Kuffeler from taking charge.

in a note, Goodbody said: ‘We believe that a NsF takeover now looks unlikely.

‘there is a risk, however small, that the NsF management team does not receive regulatory approval to run the enlarged firm. this could leave the enlarged group rudderless.’

NsF already has the backing of fund manager Neil Woodford, invesco Asset Management and Marathon Asset Management – the Provvy’s three largest shareholders who control more than 50pc of its stock.

However, it is seeking support from 90pc of shareholders to get the deal through. And although NsF could settle for less, Goodbody reckons this is unlikely.

it is thought the three investors already on board will not want to make all the others unhappy by ramming through a deal they disagree with, as they could sell out, pushing down the share price.

instead, it said the big three, who also own shares in van Kuffeler’s company, could swing round and call for the Provvy to buy NsF instead.

Goodbody also said that NsF’s credibility has been damaged by accounting mistakes which mean it breached company law when paying out dividends.

NsF’s shares jumped up dramatically, by 16.5pc, when the takeover bid was announced but have since fallen by 23.2pc.

Yesterday Provvy shares fell 0.1pc, or 0.4p, to 509.2p.