The competition watchdog has launched a merger inquiry into Non-Standard Finance’s (NSF) hostile takeover of rival sub-prime lender Provident.
The Competition and Markets Authority (CMA) called in the offer this morning to investigate whether the merger would create a “substantial lessening of competition” in the market, a week before the takeover bid could be declared “wholly unconditional” by NSF.
NSF has already proposed to demerge its Loans at Home business which would be listed on the main market to avoid competition in the home credit market.
“The CMA is inviting comments on whether the proposed demerger would remove the overlap in home credit and remedy the realistic prospect of a substantial lessening of competition that NSF has acknowledged,” the watchdog said in a statement this morning.
In response to the CMA’s announcement Provident said it was “now beyond any doubt” that the investigation will go beyond the 5 June deadline for the deal.
The company said NSF could approve the deal without knowing the outcome of the investigation, “leaving Provident shareholders exposed to a potential unknown and uncosted remedy”.
In a statement this morning Provident said: “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.”
However, NSF said its proposed demerger is a “clear cut remedy” to concerns over competition and added it remained “confident in the merits” of the offer.