NSF offer 'best rescue' for Provident Financial, says Canaccord
Canaccord Genuity upped its stance on doorstep lender Provident Financial to 'hold' from 'sell' and lifted the price target to 595p from 426p on Monday following the unsolicited £1.3bn offer from smaller rival Non-Standard Finance.
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The brokerage said a merger with NSF was the "best rescue" Provident shareholders could hope for and it would encourage them to support the transaction.
Canaccord said its fundamental estimate of fair value for PFG as a standalone entity remains 426p, with downside risk.
"However, in light of the proposed transaction, our new target price is 595p, which according to the terms of the offer is the fair value of PFG shares based on the 22nd February NSF closing price of 67p.
"Our TP is reached on the basis that we do not believe a successful counteroffer will materialise at a premium valuation to the NSF merger terms."
Canaccord said the offer was the best outcome for shareholders, who otherwise face further downgrades to come and a not remote possibility of a further capital call if the balance sheet is pressured as it expects.
"In the event that the transaction does not materialise, we envisage clear downside risk to the PFG share price and would remain a seller of the shares with a target price of 426p," it said.
Provident rejected NSF's bid on Monday, saying it was "highly opportunistic"."
"The board considers that this hostile offer represents an irresponsible approach in the context of a financially regulated business which is recovering from a period of substantial instability. The board believes that this offer could have a negative and destabilising impact on its stakeholders, including its customers, for a considerable period of time."
At 1540 GMT, the shares were up 4.4% to 615.20p.