16th Apr 2019 09:40
LONDON (Alliance News) - Provident Financial PLC Chair Patrick Snowball issued a letter to shareholders Tuesday urging them to take no action over smaller peer Non-Standard Finance PLC's "dreadful deal".
Snowball took the "unusual step" of the writing to shareholders to convey his personal views on Non-Standard Finance's "silence" on the questions raised by Provident.
He said: "I find this silence telling, particularly when it relates to straightforward questions regarding the future management of Vanquis Bank (which would be the largest business within the enlarged group), the implications of selling Moneybarn on the broader Provident group or the genuine challenges of addressing the concerns for the UK Competition & Markets Authority. On this latter point, NSF's failure to make progress with their CMA submission creates further disruption for the business and yet more uncertainty for our shareholders."
Snowball believes Non-Standard Finance's offer is "still the same dreadful deal it was on day one". He added: "It is more of a coup d'etat than a hostile takeover, spearheaded by a management team at Non-Standard Finance with a track record of value destructive acquisitions and facilitated by two powerful shareholders."
Provident, an unsecured sub-prime lender, has on several previous occasions criticised the GBP1.3 billion hostile offer, made in February, from smaller rival Non-Standard Finance - but Snowball noted Non-Standard Finance addressed one concern raised by Provident last Friday.
Provident have raised concerns over certain dividends paid by Non-Standard Finance since 2015, saying they contravened the Companies Act.
Last Friday, Non-Standard Finance said, following a review, it had identified "certain technical infringements" regarding historic distributions made by the company.
"All of the infringements can be rectified and the Non-Standard Finanace board considers that none of the issues impacts the company's financial position or prospects or shareholder value," Non-Standard Finance explained.
Provident said its is "astonished" by the announcement.
Snowball, on Tuesday, said: "The simple fact and truth of the matter is that they [the dividend payments] were unlawful. These unlawful distributions are a telling indictment of the competency of the Non-Standard Finance team and the weak oversight of their board and must call into question their ability to run a business some seven times larger than their own and one which includes a regulated bank."
"While Non-Standard Finance may now have accepted these failures under the Companies Act, through either indifference or arrogance or because they do not have the answers, they have failed to provide a comprehensive response to our other critical questions."
Snowball added: "At this point, there is no new revelation about this deal...I strongly recommend you to get behind our board and management team and reject this dreadful and opportunistic transaction."
The CMA is currently investigating the deal and the FCA has also raised concerns about any possible relaxation of controls or reintroduction of Provident's repayment option plan, given the plan incurred a fine and redress exercise of more than GBP170 million.
Provident believes there is "no realistic prospect" of the formal CMA review being completed prior to the first closing date of May 8 or May 29, the last day which the offer will be required to be declared unconditional.
Provident said the "fair and appropriate" thing for Non-Standard Finance to do would be to close the offer after the CMA publishes its Phase 1 decision, allowing Provident the opportunity to "make a fully informed decision" whether to accept the offer.
Non-Standard Finance has received valid acceptances from 128.5 million Provident shares, equivalent to 51% of Provident's issued capital. However, it would need acceptances from 90% of shareholders for a successful takeover.
Provident said it "continues to have very material concerns about the strategic, operational and financial merits" of the offer, and re-confirms that it does not recommend the offer.
Shares in Provident were up 0.9% Tuesday morning at 520.44 pence each. Non-Standard Finance was down 0.4% at 52.20p.
Related Shares:
PFG.LNSF.L