Link acquired Pepper European Servicing

[Brendan Burgess]

Press announcement this morning - extract


Link Group

Pepper European Servicing​

Link Group to acquire Pepper European Servicing​

• Link Group to acquire Pepper Group’s European loan servicing, asset management and advisory business for an upfront cash payment of €165 million
• Transaction is expected to complete in the second half of 2020
• Will create leading pan-European assert servicer with significant potential for growth

31 January 2020 - Link Group today signed an agreement to acquire Pepper European Servicing (PES) from Pepper Group for an upfront consideration of €165 million (A$266 million). Further, the meeting of Assets Under Management (AUM) thresholds and growth milestones could trigger additional consideration of €35 million (A$56 million).

PES provides end-to-end loan servicing and asset management across residential and commercial segments, with strong market positions and longstanding customer relationships in the UK, Ireland, Spain, Greece, and Cyprus. The acquisition will deliver immediate scale for Link Group’s Banking and Credit Management (BCM) division in existing and new jurisdictions.

 

[Brendan Burgess]

From the accompanying notes :

• The deal includes Irish business, Pepper Finance Corporation Ireland (“Pepper Ireland”).
• Pepper Ireland had approximately €18 billion of Assets Under Management at the end of 2019
• It services over 60,000 residential mortgage accounts, in addition to approximately 10,000 commercial loan accounts. 80% of the residential mortgages it services are performing loans.
• The transaction is at a parent-owner level and does not impact commercial and residential customers whose loans are serviced by Pepper Ireland and whose terms and conditions (including agreed Alternative Repayment Arrangements) and contact points remain the same as before.
• All customers will continue to be covered by the protections of the Central Bank’s consumer protection codes and regulations as they did before.
• Pepper employs over 500 people in Shannon and Dublin, who are not affected by today’s announcement.
• The transaction also includes Pepper Ireland’s Commercial Lending business, “Pepper Money” but does not impact existing customers loans or pending loan applications.
• The transaction is subject to regulatory approvals and is expected to close in H2 2020.

 

[MrEarl]

Hello Mr Burgess,

I suppose it was only a matter of time, before one of these operations acquired the other.

In the short to medium term, the focus will be on identifying synergy.

My expectation is that Pepper will be vacating their offices on Hatch Street, Dublin in time - a property that could easily be sub-let, in the current times.

What it means for Pepper's commercial lending arm will be interesting. I assume it will be closed down.

Likewise, I wonder what will happen to loan portfolios where Pepper have some form of "skin in the game".

Hopefully there won't be significant job cuts as a result of this transaction, but I suspect that there will be some.

I can't see how it will impact on people dealing with Pepper given the various protections that are in place. However, that said, I expect that a lot of staff in Pepper will have concerns for their futures, so may not be terribly proactive in the coming weeks and months.