Investment management firm Challenger has made an offer to acquire non-bank lender Pepper Money, with discussions ongoing.
Challenger Limited (Challenger) - one of Australia's largest provider of annuities - has made an offer to acquire listed non-bank lender Pepper Money.
According to an announcement from both Pepper Money and Challenger on Monday (9 February), it is proposed that Challenger and Pepper Group ANZ HoldCo Limited (Pepper Group) would jointly acquire Pepper Money.
The transaction is proposed to be structured as a scheme of arrangement under which, if completed, Challenger would hold no more than 25 per cent of total Pepper Money shares.
The bid offers Pepper Money shareholders (other than Pepper Group) cash consideration equal to $2.60 per share (less the final dividend in respect of 2025 and any special dividend paid or declared).
Pepper Group would initially acquire an interest in the acquiring entity that is at least equal to its current interest in Pepper Money.
The Pepper Money board has established an Independent Board Committee to assess the proposal and has granted Challenger exclusivity to undertake confirmatory due diligence and progress relevant transaction documentation in order to present "a more certain" proposal.
While the lender has said there is “no certainty that a more certain proposal will be forthcoming”, or that the indicative proposal would result in a definitive agreement, the lender said that “discussions are ongoing”.
Challenger has confirmed that it has been engaging in discussions relating to a potential transaction, stating that an investment in Pepper Money would provide Challenger with “strategic, long-term rights to access fixed income assets to support growth and returns”.
It said that any transaction would be “strategic and accretive to Challenger’s earnings per share”.
The investment management firm said: “The discussions, while advanced, are incomplete and there is no certainty the offer will eventuate in any transaction.”
Both Pepper and Challenger have said they will keep the market informed in accordance with their continuous disclosure obligations.
Pepper Money, originally founded in 2000, has been several ownership structures over its 25-year history. It first listed on the stock exchange in 2015, before being taken private when US private equity firm KKR acquired it in 2017. It was relisted on the Australian Securities Exchange in May 2021 through an IPO that raised about $500 million and valued the non-bank lender at roughly $1.3 billion.
Since then, the lender has been expanding its loan book both organically and inorganically, having launched several new products and broadening its credit appetite, as well as through loan book acquisitions.
Further details on the lender's expansion and future are expected when it releases its full-year results on 19 February.
[Related: From fringe to force: 25 years of Pepper Money]
