In the unlovely world of subprime lending – a place of high interest rates for credit-impaired borrowers – an entertaining corporate scrap has broken out.
In the establishment corner stands Provident Financial, whose directors, despite disappointing shareholders on a regular basis, probably assumed they were too grand to become the target of a hostile bid from an upstart rival.
That minnow is Non-Standard Finance (NSF), led by John van Kuffeler, who did 22 years as chairman and chief executive of Provident Financial before the lender’s rise to the FTSE 100 index went into reverse. In effect, van Kuffeler is saying he can run the Provvy better than his successors, and isn’t even offering a few cherries for control. The £1.3bn bid is an all-share zero-premium affair, a rare beast.
Who to support? Wishing a plague on both houses would be a fair stance. In its first serious defence since NSF’s initial attack, Provident on Wednesday had a pop at the bidder’s “track record of value destruction” without mentioning its own destructive tendencies. Since the end of 2015 Provident’s share price has fallen from £26 to roughly £6 as regulatory troubles have infected its main divisions – Vanquis Bank, the Moneybarn car finance unit and the traditional doorstep-lending division.
Yet NSF’s offer would be a non-starter in other circumstances. Provident is right that van Kuffeler has not enriched his new investors: floated at 100p in 2015, NSF’s shares sit at 60p. And the argument that NSF’s offer rests on “a misguided view” of regulators’ tougher demands on Provident deserves a better answer than the bidder has volunteered so far. Re-creating past glories may be harder than van Kuffeler thinks.
But there’s a hard fact at the centre of this encounter: shareholders owning 49.4% of Provident are supporting the bidder. The position feels slightly smelly since the trio – Neil Woodford, Invesco and Marathon – are also NSF’s main backers, but that’s life. Provident is in a very deep hole. It can’t rely on Woodford having to sell another portion of shares, as he did last week.
There is really only one way out: find another bidder at a superior price. There was no hint of rival interest in Wednesday’s missive but, if NSF’s offer is as ugly as Provident chief Malcolm Le May argues, the task should not be impossible. Get a move on, though: as things stand, NSF can make this fight short and sharp and expect to win.
Why is private equity moving into plastic?
Roll up, who wants to buy a plastics business in an era when plastic pollution is a serious, and now mainstream, environmental concern? The answer, it seems, is US private equity firms.
Two were in the (unresolved) scrap to buy RPC, the UK’s quoted champion of the sector, and now Olympus Partners has agreed a $585m (£445m) deal for the plastics division of DS Smith, the FTSE 100 packaging firm whose main business is in the more sustainable field of cardboard.
The sale price looks good from DS Smith’s point of view – 10-times top-line earnings for a unit that makes linings for wine boxes and fizzy drink concentrates. As importantly, DS Smith can now talk more purely about the virtues of its fibre-based boxes produced with cardboard that is typically recycled between 10 and 12 times.
But, for the rest of us, growing control of the plastics industry by the private equity brigade isn’t obviously a gain. These firms are all different but, in general, you’d expect less scrutiny, less public data and more resistance to reform.
Paddy takes a Flutter too far?
Another set-back for the (yet to be launched) Campaign for Real Company Names: Paddy Power Betfair, the gambling firm, wants to call itself Flutter Entertainments. The proposed new name is not as naff as Reach, as we must call Trinity Mirror these days, but it’s bland – and, worse, American bland.
That, presumably, is deliberate. The bosses, as they ease their way into the liberalising US market, will want to present themselves to regulators as boring corporate suits under a holding company-style umbrella. And, since different brands are used around the world, a neutral monicker is not illogical.
But chief executive Peter Jackson is pushing his luck in calling Flutter an “historical name”. Flutter.com had a short and undistinguished life before its website disappeared soon after Betfair took over in 2001. That’s history of a sort, but not the type to elevate. What was wrong with Betty Power? The industry’s joke was at least memorable.