Australian financial services group Pepper, which entered the Irish market five years ago by buying GE Capital's Irish mortgage book, has received a 650 million Australian dollar (€436 million) takeover bid from New York private equity giant, KKR.
Speculation of a bid had been rife in Sydney in recent days, with Pepper's stock rising as much as 9 per cent on Tuesday, before news of the indicative bid was revealed. KKR will now carry out due diligence on the firm, with a view to coming up with a binding offer.
Pepper was among an initial wave of overseas buyers of Irish assets at the peak of the crisis, buying GE Capital’s €600 million of subprime mortgages at 40 cent on the euro in a deal backed by Wall Street investment bank Goldman Sachs. It subsequently entered the business of managing and servicing loans of number of overseas banks who have been extracting themselves from the Irish market following the crash, as well as overseas buyers of loan portfolios in recent years.
Mortgage lending
The Irish unit, which employs more than 400 people in Shannon and Dublin, is currently managing about €18 billion of loans, roughly split between commercial and residential borrowings, for companies such as private equity firms Lone Star and CarVal, who have been active buyers of Irish loans recently, as well as Dankse Bank and Lloyds Banking Group, who have been retreating from the Republic.
More recently, Pepper’s Irish business, led by chief executive Paul Doddrell, entered the mortgage lending market and last year and, as of last month, some €150 million worth of home loans had either been drawn down or in the pipeline to be issued.
The company announced last month that it has set up a new sales division in the Republic to offer commercial mortgages.
Property development
Meanwhile, KKR has been best known in Ireland in recent times for joining forces with the Ireland Strategic Investment Fund to set up a €500 million fund to invest in fund residential property development.
In 2014, KKR acquired Dublin-based Avoca Capital, a European credit investment manager which had $8 billion (€7.05 billion) of assets under management at the time.
KKR is reported to have fought off competition from other private equity firms, including Bain Capital, in its bid to acquire Pepper.
If the deal goes ahead at the indicated price, Pepper chairman Seumas Dawes will receive about 195 million Australian dollars for his 30 per cent stake.
