Non-Standard Finance abandons plans to buy Provident Financial

The subprime lender said in a statement late on Tuesday that the offer would lapse after it learned that the Prudential Regulation Authority had concluded it would not meet minimum regulatory capital levels.

NSF had until the end of Wednesday to either declare the takeover unconditional or let it lapse.

Chief executive John van Kuffeler said: "I am very disappointed that despite our best efforts customers, employees and shareholders will not now benefit from our transformation plan to build a brighter future by combining Provident with NSF.

"I wish to thank our shareholders for their support and all of NSF's staff and self-employed agents for their continued dedication. NSF will continue to focus on delivering value to its customers, employees and shareholders by providing a helping hand to the 10-12 million UK consumers that are either unable or unwilling to access mainstream credit.

"Each of our businesses has a top three position in its respective market segment and we believe each is capable of delivering attractive long-term returns for NSF shareholders through a combination of capital and dividend growth."

Total fees for the transaction, which will be treated as an exceptional item in the 2019 half-year results, are expected to amount to between £10m and £10.5m before VAT, which is at the lower-end of the range estimated. NSF said the fees will be met from its existing resources.

Provident said in a statement on Wednesday that the outcome was in the best interests of its shareholders. It added that it "greatly regrets the unnecessary distraction, cost and impact of the uncertainty on Provident's customers and staff caused by NSF pursuing its extended hostile offer".

At 0855 BST, Provident shares were up 10% to 490.60p and NSF shares were up 2.8% at 45.70p.

Numis said: "The reason for the lapse was said to be the delay driven by the regulator, but we suspect NSF's capital position to be the major consideration. We believe Provident will have to take a charge of circa £20m to cover the costs of the deal, but the group retains surplus capital and is being valued at just 6.7x 2020 earnings. Compellingly cheap now the risk of having to support NSF has passed.

"Recovery is underway and the group remains a market leader in all business lines. However, the largest shareholder has a closed fund with substantial redemptions and the reasons why the original 49% of shareholders supported the offer still remain. Nevertheless, we believe the current share price has been driven by the market valuation of NSF and the probability of its offer succeeding, not by the fundamental value of Provident as it continues its gradual recovery."