KKR adds sweetener in €457m bid for Australia’s Pepper Group
New offer appeases shareholder and gives US buyout firm control of Pepper’s Irish unit
KKR has previously said that it is fully committed to Pepper’s Irish unit, which employs more than 400 people in Dublin and Shannon, and manages a mixture of legacy debt and about €150 million of new Irish mortgages.
Private equity group KKR has added a small sweetener to its bid for Australia’s Pepper Group, caving to a demand from the non-bank lender’s biggest shareholder and bringing the deal value to 682 million Australian dollars (€457 million).
With the new offer, which sent Pepper’s shares surging, the US buyout firm gains a slice of Australia’s mortgage market – worth 1.7 trillion Australian dollars – while investors will be able to cash in at a 42 per cent premium to its IPO price two years earlier.
Pepper also has an Irish unit, which employs more than 400 people in Dublin and Shannon, and manages a mixture of legacy debt acquired during the financial crisis and about €150 million of new Irish mortgages.
KKR has previously said that it is fully committed to the Irish business.
KKR announced a special dividend of 10 cents per share on Monday – appeasing Perpetual Investments Ltd, Pepper’s top shareholder with a 14.7 per cent stake, which had said it was unhappy with the 657 million Australian dollars offer the lender had agreed to in August.
“It’s clear we were vocal, that we felt the initial bid undervalued the company,” said Anthony Aboud, a portfolio manager at Perpetual. “This has been a decent investment for us.
“KKR have got it at a decent price and we’ve been trying to get as much as we possibly could.”
Pepper shares rose 4.6 per cent to 3.66 Australian dollars by mid-session, just below the sweetened offer price of 3.70 Australian dollars. That compares with its 2015 IPO price of 2.60 Australian dollars. Pepper’s loan book jumped 36 per cent in 2016, compared with the banking sector’s 6.5 per cent credit growth, as big banks backed off riskier lending in response to regulators’ concerns about ballooning household debt.
Although the non-bank lender is seen as exposed to a possible housing correction, Australians are generally viewed as good creditors who will cut back elsewhere to meet their mortgage payments. Pepper’s shareholders will vote on the increased offer at a meeting on November 15th.