Provident wins support from major investor
onE of the biggest shareholders in provident Financial has spoken out against a hostile takeover of the doorstep lender.
in a boost for the provvy’s efforts to fend off unwanted interest from rival non-Standard Finance (nSF), fund manager Schroders said it does not support the proposed deal.
Schroders, which is the thirdbiggest investor in the provvy with a 14.6pc stake, said the takeover could leave the firm at the mercy of a crackdown by regulators.
The warning is a bruising setback for nSF, which had been seeking the support of investors holding at least 90pc of the provvy’s stock. it means nSF will now have to accept a lower threshold of support if it is to get the bid through.
in a letter to the provvy’s chairman patrick Snowball, Schroders said: ‘Schroders does not believe that nSF’s offer is in the best interest of provident shareholders.
‘provident has faced a number of issues in recent years, but the first-quarter trading statement shows that it is on track with its recovery.
‘in our view, nSF’s bid risks destabilising this recovery, and brings additional regulatory risks and uncertainty.’
The Competition and markets authority (Cma) might block the deal, amid fears it would concentrate too much power in the hands of one business, Schroders said. However, shareholders are being asked to approve the plans before the Cma has made a decision.
if the regulator then decides that the tie-up cannot go ahead, it will have to be unpicked at huge expense.
Schroders said: ‘By issuing a deadline for acceptances that falls before the outcome of the Cma investigation is known, nSF forces shareholders to underwrite any costs of redress blindly. it also risks creating a crisis of governance if the Cma investigation takes time to conclude.’ nSF is run by the provvy’s former boss John van Kuffeler (pictured), who claims that he has the expertise to boost the company’s profits.
However, there are concerns van Kuffeler might try to squeeze more cash out of its vulnerable customers.
These fears have led the Financial Conduct authority watchdog to take the unusual step of writing to van Kuffeler, to warn him lower standards will not be tolerated.
nSF could now cut its threshold for pushing the deal through to 75pc of the company’s shareholders. it already has the backing of three large investors who control more than half of the shares. meanwhile, the provvy was forced to clarify that it was not forecasting future profits, which is against City rules, when it said it a trading update last week that it is targeting returns of 20pc to 25pc in 2021 onwards.