Provident Financial bid battle features two unappealing options

Seconds out round two. Doorstep lender Provident Financial this morning rounded on the hostile takeover approach made by its former CEO John van Kuffeler at the end of last week, calling it “irresponsible” in “the context of a financially regulated business which is recovering from a period of substantial instability”.

Before you say sarcastically intone “ooh, burn” that actually counts as quite punchy when you consider that Provvie will have had a team of lawyers, bankers and PR experts spending much of the weekend going over its statement line by line in a process that usually leads to the removal of anything really salty.

Some real saltiness may yet come, mind. You could even consider the forthcoming ding dong a bit of light relief from Brexit.

Van Kuffeler, who has some City big guns in his corner, including mega star fund manager Neil Woodford, says Provvie has lost its way, and he’s not wrong.

The doorstep lender provides credit to people who have few other options, and charges very high rates of interest for doing so. Its advocates argue that it provides an essential service, and yet when you look at the business, and the reports the likes of Barnardos have done on it, it’s hard not to come away with the feeling that there really ought to be a better way.

The problem with Provvie is it hasn’t just provided a questionable service to clients, attracting the critical interest of regulators as well as charities. It has also repeatedly let down its investors, having made a string of missteps down the years.

Those investors have been getting frustrated at the pace of the current management’s turnaround efforts – there was another nasty profit warning last month. But will a merger with van Kuffeler’s smaller Non Standard Finance (NSF) work the oracle?

That’s an open question. Provident might be a sleazy sort of business but if run properly, and with due regard to the regulator, it ought to be a relatively simple one, capable of producing acceptable if rather dull returns.

It has been caused problems through its habit of hiring ambitious bosses who’ve prioritised impressing the City by dangling whizzy and exciting returns through expanding into whizzy and exciting new business areas without paying due regard to the risks.

Van Kuffeler’s proposal, with its big name backers and promises to get the business moving again, might very well fall into that category.

It’s not promising new business areas. To the contrary. Disposals are on the menu. But it’s still about generating City excitement. Is that really what this business needs? Can van Kuffeler really do a better job than the current lot? That’s the question being asked of Provvie’s investors.

You pays your money, you takes your choice, I suppose, although no actual money will change hands because van Kuffeler proposes to make his £1.3bn purchase with new shares.

The market appears to rate his chances of winning highly, although he may first have to come up with a sweetener.

But neither option really strikes as terribly appealing. That’s rather in keeping with Provvie.