£1.3bn offer made for Provident Financial

Star trader Neil Woodford is among Provident shareholders to have accepted the £1.3bn bid

Star trader Neil Woodford is among Provident shareholders to have accepted the £1.3bn bid

The BBC quotes NSF's founder John van Kuffeler as saying: "This transaction will create a market leader in the non-standard finance sector with a strong position in all four main segments..."

The sub-prime lender has been a thorn in Woodford's side since 2017 after a series of profit warnings, FCA probes and management scandals knocked 70% off its share price.

Provident has been rocked over the last 12 months after its credit card unit Vanquis Bank was hit with a £172.1mln fine previous year relating to its repayment option (ROP) plan after an investigation from the Financial Conduct Authority (FCA).

Provident, established in 1880 and based in the northern English city of Bradford, said it was considering the offer.

"This is partly because of having a board which is not experienced in the sector", he said.

The all-share offer, pledging to revitalise the firm, has been supported by Provident shareholders, including leading fund manager Neil Woodford.

Provident Financial has 800,000 doorstep borrowers - with loan payments collected weekly from their homes - and another 1.7 million holders of its Vanquis credit card that charges up to 69.9% interest. Berenberg Bank reduced their target price on shares of Provident Financial from GBX 610 ($7.97) to GBX 590 ($7.71) and set a "hold" rating on the stock in a research note on Thursday, January 17th. But its shares are still down some 80% from their peak price of £26.36p in 2015.

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Kuffeler said he was not anxious about the impact of Brexit on subprime lending as any economic downturn would mean "more customers fall into subprime lenders as bigger banks tighten scorecards".

Provident had begun to show some signs of a turnaround a year ago after prolonged problems at its door-to-door lending business but said last month that it expects 2018 earnings to be at the lower end of market expectations, its third warning in 18 months.

It is the second time NSF has approached Provident.

Numis said: "A combination of no premium and the poor track record of delivering value (NSF came to market at 100p and is now valued at 58p) and the poor operational performance within their own home credit business leads us to question why Provident shareholders would accept the offer".

The NSF board would then oversee all of the remaining business.

"In the meantime, shareholders are strongly advised to take no action in respect of the NSF offer".

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