The non-bank lender's share soared 27% Monday morning after news broke that Pepper might soon have a new home.
Australian investment manager Challenger Limited confirmed in a release that it is teaming up with Pepper Money parent company Pepper Group ANZ HoldCo., to buy Pepper Money.
Under the "non-binding and conditional proposal," the acquisition would be structured as a scheme of arrangement.
Pepper will take a majority stake in the new structure, with Challenger receiving 25% of total Pepper Money shares, should the deal go through. Pepper Group, meanwhile, would initially keep a stake at least equal to what it already owns.
The deal will give non-Pepper Group shareholders cash equivalent to $2.60 a share minus any final dividend for 2025 or any special dividend paid or declared.
"An investment in Pepper Money would provide Challenger with strategic, long-term rights to access fixed income assets to support growth and returns," Challenger said in a statement.
In November, following the Australian Prudential Regulation Authority's (APRA) change in capital reporting rules, Challenger announced it would gradually ramp up fixed-income investments to reduce risk.
In terms of the Pepper tie-up, Challenger added: "The discussions, while advanced, are incomplete and there is no certainty the offer will eventuate in any transaction. Challenger will keep the market informed in accordance with its continuous disclosure obligations."
Pepper said in its own statement that: "Discussions are ongoing, however there is no certainty that a more certain proposal will be forthcoming or that the Indicative Proposal will result in a definitive agreement."
Pepper Money did not immediately respond to additional requests for comment. Challenger declined to comment further.
As of March 2025, Challenger, which was founded in 1985, has roughly $126 billion in assets under management.
Jefferies Australia and Reunion Capital Partners are advising Pepper Money as financial advisors, while Gilbert & Tobin is acting as legal advisor.
Pepper Money, which turned 25 last year, was founded in 2000. The non-bank offers residential home loans in both Australia and New Zealand, as well as personal, commercial, asset finance and self-managed super fund lending in Australia. The firm went public in 2015, only to go private again after being acquired by KKR in 2017. Pepper was eventually relisted on the ASX in 2021. Rumors began circulating last spring that the company was up for sale. If the deal with Challenger goes through, then Pepper Money will once again be delisted from the ASX.
As of late 2025, Pepper managed more than $20 billion in assets and has served roughly 570,000 customers. Mario Rehayem, chief executive officer of Pepper, said in September that the firm's next goal is to surpass more than one million customers by 2029.
"The horizon is looking good for us," Rehayem told Australian Broker. "What we've done in 25 years, we want to do in the next five years."
In November, Pepper joined a consortium with the likes of KKR to potentially acquire the RAMS mortgage portfolio from Westpac Banking Corp for roughly $21.4 billion. The transaction is still awaiting regulatory approvals.
Most recently, Pepper upped the ante by tapping nearly a dozen mortgage and finance industry veterans as expansion plans continue to take shape. That includes additional senior-level BDMs, relationship managers and sales staff in New South Wales, Victoria and Queensland.
Barry Saoud, chief executive of mortgages and commercial lending at Pepper Money, told Australian Broker that the new hires were driven by increased demand for both residential and commercial lending in those regions.
Pepper’s expansion comes as Australia’s non-bank sector accelerates, fuelled by tighter bank lending standards and a pullback in risk appetite.
At the same time, deal-making across Australia continues to run hot, and shows no signs of cooling.
In 2025, global M&A deal volumes reached roughly $7.46 trillion AUD, (or $4.81 trillion USD), up from $5.27 trillion AUD, (or $3.4 trillion USD), the year before, according to MergerMarket data. That's an increase of nearly 42%. And the Australian markets, while smaller, still kept pace.
In 2025, publicly-announced deals to buy or merge with companies that are based in Australia reached $143.8 billion AUD (or $92.8 billion USD), according to Dealogic.
