Non-bank lender Pepper Money
has announced the formalisation of a ‘scheme of arrangement’ permitting a takeover by a global investment firm.
In an ASX announcement yesterday (10 August), the lender laid out details of the acquisition which will see KKR Credit Advisors buy up the entirety of Pepper’s shares worth $675.9m.
The scheme will go to a shareholder vote and, if approved, will see Red Hot Australia Bidco – an entity owned by KKR – purchase the shares. Shareholders will be given the option of rolling their shares over to Bidco or selling them at $3.60 per share.
The journey towards this takeover bid started in 2016 when Pepper’s stock prices were not where the firm wanted them to be, CEO Mike Culhane told Australian Broker
“The market thought that they were pretty cheap so we had a number of inbound enquiries from private equity firms, Chinese corporates, etc. All manner of firms were interested in starting a conversation about taking a position or the sorts of transactions which could be done.”
At that stage, the board got involved, confidentiality agreements were written up, and information was shared about the company, he said.
“That process really proceeded during the earlier part of this year during the last three to five months. As we went through that process, it became clear that KKR was a potentially good partner for the business going forwards.”
This was because KKR was 100% supportive of the business, would continue to back the company’s goals, and would hopefully make Pepper even bigger, Culhane said.
“There will be no change to the name, no change to the people, and no change to the way we operate. They are 100% supportive of what we’re doing, how we’re doing it and how Mario is running the mortgage business in Australia.”
KKR was also ready to pay the highest price and were able to close the deal, he said.
“We were able to check all those boxes,” he said. “The board became comfortable. We created an independent board committee where non-executive directors considered the deal, negotiated the price, and became happy that this was a deal to recommend to shareholders.”
If shareholders approve the deal, a select number of KKR people will then join the Pepper board. Details on who they'll be will be specified at a later date.
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