Since John van Kuffeler ’s departure, Provident Financial has been a war-zone
When John van Kuffeler retired as chairman of Provident Financial in 2013, the board asked its financial adviser to calculate what return an investor would have made if they had put money in on the day JvK joined, and sold on the day he left.
According to JP Morgan Chase, investors would have made a 68-fold return over 23 years, higher than any hedge fund they could think of. Great for investors, but others might say this was an egregious return considering the nature of the doorstep lender’s business.
Since JvK’s departure, Provident has been a war-zone. Its shares have collapsed, the sub-prime lender has been through a disastrous restructuring and had to issue three profit warnings – including one which saw the biggest one-day share collapse of any FTSE 100 company. It has been investigated at least twice by the financial regulator.
Even so, JvK wants to try to work his magic again. The former chairman and chief executive, who went on to set up rival lender, Non-Standard Finance, is making his comeback with a hostile £1.3billion bid for Provvy, as the lender is known by its customers.
The bid is a nil-premium all-share reverse takeover which gives Provident’s shareholders 88 per cent of the combined businesses.
More pertinently, the takeover parachutes in a new management team from NSF which has more experience of Provident’s business than the current board itself.
Chairman Patrick Snowball has been in the hot seat only since last September and is an insurance specialist, while chief executive Malcolm Le May was a non-executive through the troubled times. Hardly inspiring for the future.
It’s no surprise that Provident’s long-suffering shareholders, Neil Woodford’s investment fund, Invesco and Jeremy Hosking’s Marathon, which together speak for over half the shares, have given their thumbs-up.
They are also investors in NSF so the financial engineering behind joining the two forces is compelling. Snowball has told investors to take no action but not given them anything to hold on to.
The former tank commander has some room for manoeuvre as the shares shot up 12 per cent to 574p on the news.
Investors can perhaps expect a little more from the bidders but there are unlikely to be other suitors. The fight seems over bar the formal surrender.
However, there are other tough questions to ask of the assault. For starters, is Provident’s reputation too damaged to be worth rescuing? And can he rework his magic when the home lending market is under such pressure?
JvK does not think it’s too late, and he claims the industrial logic is irrefutable. He’s probably right as he knows the business better than anyone. But investors hoping to see returns as high as before may be disappointed as the home credit market is now subject to stricter regulation.
Thank goodness for that. Lenders like Provident and NSF defend themselves by claiming they are helping those who otherwise would have no access to finance. This is fair enough, up to a point. It does not justify the outrageous interest rates which they charge, and which the FCA should continue to clamp down on.
Cheese for China
Brexit did not crop up once in the bid talks between Canada’s Saputo and the UK’s Dairy Crest which led to yesterday’s £975million agreed offer. Not once.
What did get discussed was the ambition to help Dairy Crest turn its cheese and butter products into global brands.
The Italian Saputo family, which controls a third of the Montreal-based dairy giant, reckons Cathedral City cheese, Clover spreads and Country Life butter have a fabulous future ahead of them with US and Chinese cheese-eaters.
Chief fromager, Lino Saputo, says there will be no job losses among Dairy Crest’s 1,100 workforce – bar maybe a few non-executive directors – and that he wants to take the business global, not slice it up.
Saputo’s past record suggests he’s true to his word: he employs 15,000 and has gobbled up 30 firms over the last few years.
It’s always a concern when a British company falls to a foreign predator. However, maybe we shouldn’t be sniffy about this bid but see it through a different prism, because of the timing, as a vote of confidence at a time of such doom and gloom.
Interesting too, that this is Saputo’s first move into Europe.
It’s good timing for the family with the pound lower against the Canadian dollar. But they may have to be squeezed a little more. The Cornish cheese-maker’s shares closed last night up at a creamy premium to the 620p offer price.