Non-Standard Finance has acknowledged that several of its dividend payments since 2016 broke companies law, putting further pressure on its hostile takeover bid for rival subprime lender Provident Financial.
In an announcement after markets closed on Friday, NSF said an internal review had found a series of “technical infringements” of the Companies Act including one that meant the group’s distributable reserves — the profits legally available for paying out to shareholders — had been lower than previously thought for the last three years.
NSF has been engaged in an increasingly bitter battle for control of its larger rival Provident since February. The potential rule breaches were first pointed out by Provident as part of its defence efforts earlier this month.
NSF said that “none of the issues impacts the Company’s financial position or prospects or shareholder value”, but analysts cautioned that the errors could make it harder for the company to win further shareholder support for its takeover bid. John Cronin, analyst at Goodbody, noted earlier on Friday that if correct, the mistakes “have, potentially, very serious implications for the probability of this deal happening”.
Just over half of Provident’s shareholders have accepted NSF’s bid, but the company is looking to win approval from 90 per cent of investors by early next month.
In a separate announcement on Friday morning, Provident said it “continues to have significant concerns about the Offer, not least because NSF has repeatedly made pre-tax losses on a statutory basis, its share price is near an all-time low, and it would opportunistically benefit from the relative financial strength of Provident”.
NSF, which is run by former Provident chief John van Kuffeler, made a move for Provident after a period of turbulence that included three profit warnings in 18 months and an emergency rights issue. Mr van Kuffeler has argued that his team is better-equipped to turn Provident around, but Provident’s own management says it has already made solid progress and cast doubts on NSF’s record.
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