Schroders calls out Woodford in rejection of hostile takeover bid for Provident Financial
Non-Standard Finance targeting Provident
Schroders has rejected the hostile takeover bid for Provident Financial (PFG) by Non-Standard Finance (NSF).
In a letter to Provident Chairman Patrick Snowball on 7 May, fund manager Kevin Murphy and global head of stewardship Jessica Ground said Schroders would not be accepting NSF's unsolicited offer for PFG.
NSF made a £1.3bn offer for PFG in February, the firm's second in just over a year. PFG rejected the offer and shortly after the CMA announced it had launched a merger enquiry into the bid.
Schroders currently holds 14.6% of PFG stock and has no holding in NSF.
The letter said: "Schroders does not believe that NSF's offer is in the best interest of PFG shareholders. PFG has faced a number of issues in recent years, but the Q1 trading statement shows that it is on track with its recovery and rehabilitation. In our view, NSF's bid risks destabilising this recovery, and brings additional regulatory risks and uncertainty."
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Due to the deadline for acceptance of the bid falling before the outcome of the CMA investigation into NSF is known, Schroders warned that PFG shareholders would be forced to "blindly" underwrite any costs of redress while there could potentially be "a crisis of governance" during the investigation.
Schroders said NSF faces "a number of operational and regulatory challenges", which includes an FCA investigation of its guarantor lending business, and railed against shareholders in both firms - such as Woodford Investment Management, Invesco and Marathon - supporting the bid.
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"We do not believe the shareholders of PFG who are also collectively majority shareholders in NSF should be seeking to impose the challenges of the latter company on the former. We are concerned that the right of minority shareholders are not being protected, and that this represents poor stewardship.
"In our view, the best interest of PFG shareholders would be best served by the existing management continuing to execute on their recovery plans. Given the urgency of this situation, and in line with our policy on escalating engagements, we will be making our views public."
Murphy co-manages the £1.2bn Schroder Recovery fund and the £2.3bn Schroder Income fund alongside Nick Kirrage.
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