UK's competition watchdog looking at market impact of proposed Provident takeover

UK's competition watchdog looking at market impact of proposed Provident takeover
By Reuters

(Reuters) – Britain’s competition watchdog is considering the possible market impact of a union between subprime lenders Non-Standard Finance Plc (NSF) and Provident Financial Plc, after Provident spurned a takeover bid.

The Competition and Markets Authority said on Tuesday it had served the companies with an initial enforcement order, potentially preventing NSF from making another bid for its larger rival.

A spokesman for NSF said that the company had discussed its offer with regulators and the talks remained ongoing. Provident did not immediately respond to a request for comment.

British lender Provident on Monday rejected a 1.3 billion pound takeover bid launched by its former CEO and said it was looking for a better solution to turn around its business.

Smaller rival NSF, led by ex-Provident boss John van Kuffeler, announced on Friday that it had offered to buy Provident, which has run into trouble with regulators worried about the rates it charges on loans.

The watchdog asked NSF not to take any actions that might lead to the integration of the two businesses, transfer control of the firms or their units or stop the firms from competing independently in any of the markets affected by the transaction.

The watchdog also asked the firms to stick to their the pre-merger business plans, with no extraordinary management changes or asset sales.

The CMA also put the brakes on any changes to existing contracts.

Provident and NSF provide short-term loans to consumers who might otherwise struggle to borrow from more mainstream banks. British lawmakers want to rein in the high interest rates such firms charge on borrowing by often vulnerable people.

Provident’s share price has tumbled 75 percent in the last two years, hit by a botched reorganisation of its home credit business which led to profit warnings, the departure of its CEO, the suspension of dividends and regulatory issues.

NSF had proposed simplifying Provident, selling two units and demerging Provident’s home credit business and its Loans at Home unit. Provident, however, said the disposals did not make economic sense and a demerger of Loans at Home would result in a “subscale listed company”.

NSF, founded only five years ago by van Kuffeler, has a market value of 210 million pounds, but has the backing of several Provident shareholders including Neil Woodford, Invesco and Marathon for the bid.

(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Bernard Orr)

You might also like