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Pepper accepts $675m takeover deal

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money
Reporter 2 minute read

Non-major lender Pepper has confirmed that it has accepted a takeover offer from California-based investment manager KKR totalling $675.9 million.

Pepper Group Ltd (Pepper) has been in talks with KKR for several months now, but a deal hasn't been reached until this month.

The board of the ASX-listed non-bank lender announced on 10 August that it has entered into a scheme implementation deed with an entity owned by KKR Credit Advisors.

The entity, known as Red Hot Australia Bidco, has proposed to acquire all of Pepper’s shares. If granted, Pepper shareholders will receive a cash payment of $3.60 per Pepper share plus a 3 cent dividend.

With more than 181 million shares on issue, KKR will acquire Pepper for $675.9 million, $37 million more than the current market cap of $638 million. Pepper shares were valued at $3.43 before the market opened this morning. 

The deal is subject to a number of conditions — in addition to shareholder approval, such as Foreign Investment Review Board (FIRB) approval and the approval of other local and foreign regulatory bodies — given Pepper’s business interests in Ireland, Korea and the UK.

It is expected that the approval process will be finalised by “early November”.

'Nothing will change' for brokers

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The group has been quick to reassure brokers that “nothing will change” as a result of the takeover. 

Speaking to The Adviser, Pepper’s group chief executive officer, Mike Culhane, said: “Our future strategy is everything that Mario [Rehayem, managing director of Australian mortgages and personal loans at Pepper] has articulated to the brokers.   

“From a broker's perspective, absolutely nothing will change. There is no change in personnel, no change in name, no change in approach — Mario is the face of our mortgage business in Australia and will continue to do so. 

“So, there is more of the same going forward.” 

Adding that the deal had been "a long time coming” (and revealing that the group had been approached by a number of different parties regarding a takeover almost 12 months ago), Mr Culhane said that the KKR bid was Pepper’s first choice due to it being a “great, quality partner for Pepper”, “signing up to Pepper’s future strategy”, as well as offering an attractive deal. 

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Mr Culhane told The Adviser that the “only (positive) difference” in the KKR acquisition is the fact that KKR brings to the table “access to huge amounts of capital”. 

As one of the oldest and largest private equity firms (managing in excess of US$120 billion), there would be “a lot of capital” that Pepper could access to grow the business, the CEO said. 

Mr Culhane added: “That was the key thing for me, in terms of all the different parties that we had been talking to over the last few months. . . . and the fact that everybody at KKR was fully on board with what we're doing, what our strategy is and the fact that there will be more of the same going forward.”

[Related: Pepper Group in takeover talks]

 

Pepper accepts $675m takeover deal
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