Private Equity Firm Attempts to Buy Pepper Group at a Discount After Share Price Jump

Year-to-date, home loan provider, Pepper Group Ltd [ASX:PEP] is up more than 50%. In February this year, Pepper’s FY16 results were extremely positive. Revenues were up 29.7%, while net profits jumped 1,710% to $61.6 million.

This morning, Pepper shareholders woke up to a takeover bid from private equity firm KKR. Yet, instead of offering a substantial premium for the small growing company, KKR tried to snatch up the company for a discount.

What happened to the Pepper Group Ltd Share Price?

This morning, Pepper announced that KKR bid $3.60 per share for the company. Yet this is a 4% discount on Pepper’s closing price yesterday. KKR is also offering shareholders up to 3 cents per share in dividends.

But even with a 3 cent dividend, the total price is still a discounted offer.

What’s next for the Pepper Group?

It would be ridiculous for Pepper’s board to sell out now. Surely KKR doesn’t even believe that its bid will be accepted. Maybe KKR just wants to inspect Pepper’s financials. Then, if it likes what it sees, it’ll increase its bid.

Since the offer is below Pepper’s market price, I don’t think shareholders should take the bid seriously.

Over the past year, Pepper has been a great investment. The stock has climbed more than 66% — largely on the back of earnings growth. Who’s to say it won’t continue to grow into the future?

Regards,

Härje Ronngard,

Junior Analyst, Money Morning

PS: If you’re interested in investing in smaller growth stocks, check out Sam Volkering’s new report, ‘Top Three Aussie Small-Cap Stocks’.

Sam is a small-cap guru. He’s managed to find growth in a market where many investment professionals simply can’t find any.

To get your free copy of Sam’s report, click here.


Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

Money Morning Australia is published by Port Phillip Publishing, an independent financial publisher based in Melbourne, Australia. As an Australian financial services license holder we are subject to the regulations and laws of Corporations Act and Financial Services Act.


Leave a Reply

Your email address will not be published. Required fields are marked *

Money Morning Australia