Response to announcement from the CMA
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION
FOR IMMEDIATE RELEASE
29 May 2019
Provident Financial plc ("Provident")
Response to announcement from the Competition and Markets Authority ("CMA")
Provident notes the announcement from the CMA today stating that it has commenced its investigation into the unsolicited Offer from Non-Standard Finance plc ("NSF") for Provident and that the invitation to comment ("ITC") period has commenced.
NSF has acknowledged that the Offer is likely to lead to a substantial lessening of competition ("SLC") in the home collected credit industry. As such, the Offer is likely to require a Phase 2 review, unless a suitable remedy is agreed with the CMA.
The Provident Board has raised significant concerns in relation to NSF's proposed remedy of the demerger of Loans at Home, including:
§ Loans at Home's viability and sustainability as a standalone business;
§ the cost of demerging Loans at Home with sufficient capital to fund itself on a debt-free basis; and
§ the possibility that the Government's Good Work Plan, which sets out wide-ranging proposals for fundamentally changing the way businesses engage with flexible and semi-flexible workforces, makes it more difficult for Loans at Home to engage self-employed workforces.
Given the formal investigation by the CMA only commenced today, the Provident Board further notes that it is now beyond any doubt that such investigation will not be concluded before 5 June 2019, the latest date for NSF to declare the Offer wholly unconditional. In order to declare the Offer wholly unconditional, the Provident Board believes that NSF would need to waive the CMA condition without knowing whether, or with what remedies, the combination of Provident and NSF would be approved, leaving Provident Shareholders exposed to a potential unknown and uncosted remedy, which it believes would be materially value destructive. Provident Shareholders will therefore be denied the opportunity to make a fully informed assessment of the Offer and, as previously announced, there are serious potential consequences of which Provident Shareholders should be aware, as follows:
§ if the Offer were completed without CMA approval, the Provident and NSF groups would be required to be held separate under independent management for a potentially prolonged period under the CMA's Initial Enforcement Order ("IEO") of 22 February 2019. In that time, while the two groups are operated separately, shareholders would not receive any synergy benefits supposedly offered by the acquisition;
§ there is the additional and very real risk that the CMA will not find the proposed remedy adequate and consequently refer the combination of Provident and NSF to a Phase 2 review by the CMA lasting six months or more. The Takeover Code provides that any offer that is referred to Phase 2 review prior to the first closing date, or prior to the offer becoming unconditional as to acceptances, whichever is the later, automatically lapses. NSF's approach to the Offer timetable has had the effect of depriving Provident Shareholders of this protection and has exposed them to significant uncertainty and downside risk. Furthermore, if the remedy is not ultimately approved by the CMA, there is a risk that the combination would have to be unwound, incurring further value destruction for Provident Shareholders; and
§ the costs associated with these issues will be borne in the most part by Provident Shareholders: based on the latest level of acceptances of 53.5 per cent. of Provident Shares assented to the Offer, former Provident Shareholders would own approximately 79.4 per cent. of the enlarged share capital of NSF, with this percentage increasing should further Provident Shares be assented to the Offer
The Provident Board believes that this is a very significant development, introducing a far greater degree of uncertainty for the NSF Offer than previously indicated by NSF. The Provident Board believes that Provident Shareholders are not able to assess or even estimate the full economic consequences of the NSF Offer and therefore the NSF board should show due consideration to all Provident Shareholders by allowing it to lapse.
Unless otherwise defined, all capitalised terms in this announcement shall have the meaning given to them in the response document published on 23 March 2019
Sources and bases
Unless otherwise stated, as at 29 May 2019:
· The total issued share capital of Provident is 253,378,601, as at 30 April 2019
· As disclosed by NSF on 28 May 2019, as at 3:00pm on 24 May 2019, NSF had received valid acceptances for the Offer in respect of 135,667,870 Provident Shares representing 53.5 per cent. of the total issued share capital of Provident
· The assertion that former Provident Shareholders would own approximately 79.4 per cent of the enlarged share capital of NSF is calculated by reference to a) the total issued share capital of NSF of 312,049,682 (excluding 5,000,000 NSF Shares held in treasury), as at 7 March 2019 and; b) the exchange ratio of 8.88 new NSF Shares for each Provident Share, as prescribed under the NSF Offer
Enquiries
Provident Financial plc, Tel: +44 12 7435 1135
Patrick Snowball, Chairman
Malcolm Le May, Chief Executive Officer
Gary Thompson / Vicki Turner, Investor Relations, Tel: +44 12 7435 1900
Richard King, Media, Tel: +44 20 3620 3073
Barclays (Joint Lead Financial Adviser and Corporate Broker to Provident)
Richard Taylor, Tel: +44 20 7623 2323
Kunal Gandhi
Francesco Ceccato
Derek Shakespeare
J.P. Morgan Cazenove (Joint Lead Financial Adviser and Corporate Broker to Provident)
Ed Byers, Tel: +44 20 7742 4000
Jeremy Capstick
Claire Brooksby
James Robinson
Jefferies (Financial Adviser to Provident)
Graham Davidson, Tel: +44 20 7029 8000
Philip Noblet
Barry O'Brien
Brunswick (PR Adviser to Provident)
Nick Cosgrove, Tel: +44 20 7404 5959
Charles Pretzlik
Simone Selzer
Further Information
Barclays Bank PLC, acting through its Investment Bank ("Barclays"), which is authorised by the Prudential Regulation Authority (the "PRA") and regulated in the United Kingdom by the Financial Conduct Authority (the "FCA") and the PRA, is acting exclusively as corporate broker and financial adviser for Provident and no one else and will not be responsible to anyone other than Provident for providing the protections afforded to clients of Barclays nor for providing advice in relation to any matter referred to in this announcement.
J.P. Morgan Securities plc, which conducts its UK investment banking business as J.P. Morgan Cazenove, is authorised by the PRA and regulated by the FCA and the PRA in the United Kingdom. J.P. Morgan Cazenove is acting exclusively as corporate broker and financial adviser to Provident and no one else in connection with the matters set out in this announcement and will not regard any other person as its client in relation to the matters set out in this announcement and will not be responsible to anyone other than Provident for providing the protections afforded to clients of J.P. Morgan Cazenove or its affiliates, or for providing advice in relation to the contents of this announcement or any other matter referred to herein.
Jefferies International Limited ("Jefferies"), which is authorised and regulated in the United Kingdom by the FCA, is acting for Provident and no one else in connection with the matters set out in this announcement. In connection with such matters, Jefferies will not regard any other person as their client, and will not be responsible to anyone other than Provident for providing the protections afforded to clients of Jefferies or for providing advice in relation to the contents of this announcement or any other matter referred to herein. Neither Jefferies nor any of its subsidiaries, affiliates or branches owes or accepts any duty, liability or responsibility whatsoever (whether direct, indirect, consequential, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Jefferies in connection with this announcement, any statement contained herein or otherwise.
Forward looking statements
This announcement may contain certain "forward looking statements" regarding the financial position, business strategy or plans for future operations of Provident. All statements other than statements of historical fact included in this document may be forward looking statements. Forward looking statements also often use words such as "believe", "expect", "estimate", "intend", "anticipate" and words of a similar meaning. By their nature, forward looking statements involve risk and uncertainty that could cause actual results to differ materially from those suggested by them. Much of the risk and uncertainty relates to factors that are beyond Provident's ability to control or estimate precisely, such as future market conditions and the behaviours of other market participants, and therefore undue reliance should not be placed on such statements which speak only as at the date of this document. Provident does not assume any obligation to, and does not intend to, revise or update these forward looking statements, except as required pursuant to applicable law or regulation.
Important Notices
A copy of this announcement will be made available, subject to certain restrictions relating to persons resident in restricted jurisdictions, on the Provident website at www.Providentfinancial.com by no later than 12 noon (London time) on the business day following this announcement. For the avoidance of doubt, the content of this website is not incorporated by reference into, and does not form part of, this announcement.
This communication is not intended to and does not constitute an offer to buy or the solicitation of an offer to subscribe for or sell or an invitation to purchase or subscribe for any securities or the solicitation of any vote in any jurisdiction. The release, publication or distribution of this communication in whole or in part, directly or indirectly, in, into or from certain jurisdictions may be restricted by law and therefore persons in such jurisdictions should inform themselves about and observe such restrictions.
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