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?


Härje Ronngard,

Junior Analyst, Money Morning

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