Australia's Pepper accepts KKR credit unit's buyout offer

According to a filing KCA will pay A$3.60 per share for Pepper, valuing the company at A$676 million ($532 million). The price represents a premium to the previous day’s closing price of A$3.46. Pepper’s board will also be entitled to pay a dividend of up to A$0.03 per share to shareholders.

Following the announcement in the morning of August 10, Pepper’s stock opened at A$3.58; at midday it was trading at A$3.55. At the time KCA announced its offer last month, the price had briefly spiked to A$3.75. The highest point it has reached since then was A$3.58.

Along with the cash offer KCA has made an alternative equity offer under which Pepper shareholders may receive one share in Red Hot Australia, the special purpose vehicle under which it is performing the acquisition, for each of their shares in Pepper. Shareholders taking advantage of this option must exchange all of their shares.

The offer requires that shareholders holding at least 35% of the company’s equity take one of the options. Pepper’s chairman, CEO and CFO, who control a 35.5% stake between them, have already indicated their support for the buyout. The company’s board recommended unanimously that shareholders approve the offer.

Pepper specializes in loans to creditworthy customers who may find it difficult to get credit from a bank, such as the self-employed. It mainly operates within Australia and New Zealand but does significant business in Europe as well. The company also services loans on behalf of other banks and financial institutions and provides advisory services to corporate clients.

According to the most recent annual report, for the year ended December 2016, the company recorded revenue of A$685 million, up from A$528 million the year before. Over the same period, net profit grew from A$3 million to A$62 million.

KCA invests across a range of credit scenarios, including direct lending, mezzanine financing, and special situations. As of December 2016, the unit had 125 investment professionals globally and one of its seven offices is located in Sydney. It seeks to bring value to investees by leveraging the full KKR network including the private equity and capital markets teams.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Australasia
• Financials
• Buyouts
• Australia
• KKR
• Financial Services