Lender Amigo seeks buyer amid increased pressure from regulators
27 January 2020, 09:44
The guarantor lender has seen its share value dive by more than 75% since June.
Lender Amigo has put itself up for sale and launched a strategic review after losing more than 75% of its share value since June.
The guarantor lender – which allows people with poor credit history to borrow money by naming friends or family members as guarantors – has seen its value dive sharply over the past year on the back of regulatory scrutiny.
Amigo said that Richmond Group, which owns a 60.6% stake in the business, has said it would be a “willing seller” of Amigo.
The company has hired RBC Capital Markets to lead the review and sale process.
No approaches to buy the business have been made yet and shareholders have been advised that there is no certainty of offers or a sale.
The Bournemouth-based firm said its review will look at the “company’s strategy, ownership and operating model” and consider the sale of the business as a whole or selling separate parts of the company.
This could lead to a “reorganisation of entities within the group, the sale of the UK business or the sale of certain books of business including a potential de-listing of the company’s shares”, it said.
Amigo said its loan book growth and impairments have been in line with expectations for the past nine months.
However, it added that the launch of the review could affect future lending volumes as the business.
In an update to the stock market, the company said it continues to face a “challenging operating environment”.
It said: “While Amigo remains confident in the robustness of its approach to lending decisions, we are concerned that there may be increased pressure on our business and a continual evolution in the approach of the Financial Ombudsman Service.
“We continually look to enhance our processes and are monitoring developments with a view to assessing the long-term impact on the company.”
Last month, Hamish Paton stepped down as chief executive after just five months as founder and Richmond Group chief James Benamor returned to the business as a non-executive director.
Amigo floated on the London Stock Exchange in 2018 with market capitalisation of £1.3 billion, but it is now valued at around £323 million.
Russ Mould, investment director at AJ Bell, said: “By saying it wants to sell its stake, Amigo’s biggest shareholder, Richmond, has sent a signal to the market that it sees little chance of value generation in the near term.
“This is somewhat odd as Richmond only recently had two of its representatives appointed to Amigo’s board, which led to the resignation of both the chairman and chief executive.
“Richmond may have come to the conclusion that this isn’t a fight worth backing and it is better to cut its losses than continue sweating away.”
Shares in the company plummeted 32.1% to 46.2p in early trading on Monday.