Australia's Pepper Money soars on $815 million bid from Challenger, major shareholder

By Kumar Tanishk and Rajasik Mukherjee

Feb 9 (Reuters) - Australia's Pepper Money PPM.AX received a takeover offer from investment manager Challenger CGF.AX and majority shareholder Pepper Group on Monday that values the firm at A$1.16 billion ($814.90 million), sending its shares to a record intraday gain.

The offer comes as consolidation interest picks up across Australia's consumer and non‑bank lending sector, fuelled by a rebound in loan demand and stronger funding conditions for alternative lenders.

Pepper Group ANZ HoldCo, Pepper Money's top shareholder with about 60% stake, is a unit of Pepper Global Topco, which is in turn owned by U.S. private equity firm KKR KKR.N. It will initially retain at least its current stake in the New South Wales-headquartered firm.

Shares of Pepper Money soared 33.52% to A$2.350 to log their biggest intraday percentage gain ever, after the non-bank lender said its shareholders would get A$2.60 a share, a 47.7% premium to the stock's last close.

"It's a strong outcome for Pepper holders: the premium crystallises value that public markets never properly recognised and puts the business back where its origination model is better suited, in private hands," said Mark Gardner, founder and CEO of MPC markets.

If the offer goes through, Pepper Money would leave the stock exchange for the second time in its history.

Founded in 2000, the firm was first listed on the Australian stock exchange in 2015 before KKR took it private in 2017. Pepper Money was then relisted in 2021 in Australia's biggest initial public offering of the year during that time.

In a separate statement, Challenger said it would cap its stake at 25% if the deal proceeded, noting that the investment would give it long-term access to fixed‑income assets to bolster growth and returns.

Challenger shares fell as much as 7.51% to rank among the biggest laggards on the benchmark stock index .AXJO, which was last up 1.9%.

"Challenger’s selloff is a classic acquirer reaction... the high premium is pushing some investors to bail... they're just as worried about capital, and execution," said Gardner.

Pepper Money's independent board has granted Challenger exclusive access to books to conduct due diligence and proceed with transaction documentation after reviewing the deal.

Last year, Humm Group HUM.AX disclosed a non‑binding approach from Credit Corp CCP.AX. Block XYZ.AX completed the acquisition of buy-now-pay-later firm Afterpay in 2022.

($1 = 1.4235 Australian dollars)