Shares in sub-prime lender Provident Financial (PFG) surge 14% higher to 504p after Non-Standard Financial (NSF) drops its hostile takeover due to the regulatory capital requirements of the enlarged group.
It has become apparent that because of the low level of acceptances, and large majority interests, the enlarged group would not meet it capital requirements. Shareholders opposing the deal represent 21.6% of the capital.
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At the time of the offer going unconditional on 15 May, acceptances for the deal totalled 53.5% of the votes.
On 29 May the Competition and Markets Authority (CMA) had acknowledged there was a realistic prospect of a significant lessening of competition in relation to home credit. NSF offered to demerge the Loans at Home business as a potential remedy.
The proposed takeover was on thin ice after M&G and others stated that they supported Provident Financial’s strategy and did not think a combination with Non-Standard Financial and subsequent break-up would add value to shareholders.
Schroders urged shareholders to reject the deal, stating: ‘We remain of the view that it is in the best interests of those Provident Financial shareholders who are not also shareholders in Non-Standard Financial to reject the Non-Standard Financial offer and continue to hold premium listed Provident Financial stock, confident in the protection for minority shareholders that this provides.’
Non-Standard Financial has re-iterated that the lapsing of the offer does not affect the capital or regulatory position of the business going forward.
The Provident Financial board says that it believes the outcome is in the best interest of shareholders and regrets the unnecessary distraction and impact on its customers and staff.