News Column

Provident Financial Revs Up With GBP120.0 Million Moneybarn Purchase

August 14, 2014

Samuel Agini

LONDON (Alliance News) - Subprime lender Provident Financial PLC Thursday said it has agreed to acquire Duncton Group Ltd, which operates under the Moneybarn brand, for GBP120.0 million, and simultaneously unveiled plans to raise an equivalent gross amount in a placing of new shares.

In a statement, Provident Financial said it is acquiring Moneybarn, which provides secured car finance to non-standard customers in the UK and operates mainly through brokers, in order to broaden its product offering and to create a "third leg" of earnings to complement its consumer credit and its credit card divisions.

"Moneybarn's origination has been muted recently, given funding constraints, and this leaves scope for growth going forward. The board believes that the business is highly scalable, given the strength of broker relationships and market leading credit decisioning, combined with the strength of the group's balance sheet," Provident Financial said in a statement.

"Potential opportunities for synergies with the group's existing businesses, including enhancements to underwriting and collections capabilities, the development of a business-to-consumer proposition and leveraging the Vanquis Bank customer base, will be evaluated post-acquisition," it added.

For the 2013 financial year, Moneybarn reported audited pretax profit of GBP5.5 million, gross assets of GBP151.6 million and net receivables of GBP128.5 million under UK GAAP. Provident Financial said that Moneybarn's existing management team, led by Peter Minter, will be retained. They will report directly to Provident Financial Chief Executive Peter Crook.

Provident Financial said it will conducted the GBP120.0 million share sale, representing about 4.1% of its market capitalisation, through an accelerated bookbuild, a process of offering shares in a short time period with little to no marketing. The net proceeds of the placing will be used to fund a "significant proportion" of the Moneybarn acquisition, with the remainder to be funded with existing cash resources.

The number of placing shares - up to 7.0 million - and the price at which they are placed will be agreed by JP Morgan Cazenove, the bookrunner, and Provident, at the close of the bookbuild. JP Morgan Cazenove has agreed, subject agreement with Provident Financial as to the number and price of the placing shares, to underwrite the settlement risk if the placees fail to take up their allocation.

The company has GBP307.0 million of headroom on its committed debt facilities, more than enough to cover the part of the acquisition unfunded by the equity placing.

Provident Financial said that funds managed by Invesco Asset Management Ltd, which hold a 19.2% stake in the company, have said they will support the placing and intend to participate, though their current plans are not binding and may change at their discretion.

Its shares were unchanged at 2,065.00 pence early Thursday.

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Source: Alliance News

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