26th Feb 2019 10:25
LONDON (Alliance News) - The UK Competition & Markets Authority has served Non-Standard Finance PLC an initial enforcement order over its potential acquisition of larger peer Provident Financial PLC.
Non-Standard Finance on Friday made a hostile all-share takeover offer worth GBP1.3 billion for Provident Financial, with the support of just over 50% of Provident's shareholders.
However, the competition watchdog's order will prevent the integration of the two businesses until it has conducted an investigation.
The CMA will investigate the deal's effect on competition. During that time, Non-Standard Finance and Provident Financial businesses must be kept separate with no integration or transfer of ownership and Provident Financial's separate sales and brand identity must be maintained.
Shares in Provident Financial were up 1.3% Tuesday morning at 618.20 pence each. Non-Standard Finance was trading down 0.8% at 62.00p.
The two companies exchanged insults on Monday after Provident Financial said its shareholders should reject the offer.
Provident Financial said it was "disappointed" at the "unsolicited and highly opportunistic" takeover offer from Non-Standard Finance.
Provident Financial said it considers the "hostile" offer an "irresponsible approach" considering the Provident is recovering from a period of "substantial instability".
Having considered the offer over the weekend, Provident said the terms "do not reflect" the underlying value of the company and the "upside potential" of its businesses.
Provident also questioned Non-Standard Finance's "track record" and its "ability to execute" the proposed strategy and manage a business the size of Provident. Specifically, Provident points out the "limited" regulatory and operational experience in the Non-Standard Finance executive management team in managing a bank.
Later Monday, Non-Standard Finance said that Provident Financial's bid rejection statement didn't state the company's strategy to address what Non-Standard Finance sees as the significant financial, operational and cultural challenges facing the Provident Financial's business.
Non-Standard Finance, in its statement, also pointed out that Provident Financial's decision to postpone its 2018 results announcement by two weeks to March 13 is highly unusual and delays the opportunity for shareholders to judge the company's recent performance.
Despite the terms of Non-Standard Finance's all-share merger proposal offering no premium, it has the support of Provident Financial shareholders Woodford Investment Management UK, Invesco Ltd, and Marathon Asset Management LLP UK, holding just over 50% of Provident.
Related Shares:
PFG.LNSF.L