M&G stands with Schroders in hostile Provident bid

Bid is backed by biggest shareholders Neil Woodford and Invesco

M&G has joined Schroders in denouncing Non-Standard Finance’s (NSF) hostile takeover bid for beleaguered Provident Financial, putting it on the opposing side of major shareholders Neil Woodford and Invesco.

The fund group said in a letter to the Provident chairman, posted to the RNS on Tuesday, that its intention is “to not accept” NSF’s offer for its 4.2 million shares or a 1.7% stake in the doorstep lender.

Head of corporate finance and stewardship Rupert Krefting said: “M&G is supportive of Provident Financial’s current strategy and does not believe that a combination with NSF and subsequent breakup of the enlarged group will create value for PFG shareholders, and therefore is not in the best interest of our investors.”

M&G’s declaration comes shortly after Schroders, which is the third largest shareholder with a 14.63% stake in the business, also came out against NSF’s offer.

Writing to the Provident board, Schroders fund manager Kevin Murphy and global head of stewardship Jessica Ground expressed concerns that the deal with NSF risks destabilising Provident’s recovery “and brings additional regulatory risks and uncertainty”.

Including M&G, holders of approximately 20.2% of Provident shares have now publicly come out against NSF’s offer.

As the two largest institutional shareholders in the business Woodford and Invesco own just shy of half of the business (45.75%) between the two of them. The duo also owns over 53% of NSF, which puts them on both sides of the deal.

NSF has been trying to takeover Provident since February this year when it put in a £1.3bn bid for the consumer credit firm.

On 15 May NSF declared victory after shoring up enough support from Provident shareholders for the takeover for its bid to become “unconditional as to acceptances”.

This elicited a wave of responses from investors who refuse to back the deal including Schroders, New York hedge fund Coltrane Asset Management and, most recently, M&G.

The Provident board also hit back at NSF calling the offer flawed and value destructive and urging shareholders to continue to take no action in response.

The FTSE 250 sub-prime lender has been a thorn in the side of many prominent investors since 2017 after a series of profit warnings, FCA probes and management scandals wreaked havoc on its share price. It has remained one of the biggest underperformers in Woodford’s flagship UK Equity Income fund, which has severely lagged peers in the UK All Companies sector since launch.

Shares in Provident have fallen 22% to 453p year-to-date and are down over 80% from their peak price of £26.36p in 2015.

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