Kensington agrees to Investec takeover

Ailing mortgage lender Kensington Group today agreed to be bought by banking firm Investec in a deal valuing the group at £283m (€416m).

Investec emerged as the winning bidder after Kensington held talks with a number of potential suitors as part of a review of the beleaguered business.

Other groups thought to have been interested in acquiring the group include US investment bank Morgan Stanley, Deutsche Bank and Merrill Lynch.

Investec will pay 519.5p a share for the sub-prime and niche home loan specialist under the deal, which comes at a troubled time for Kensington.

Kensington chief executive John Maltby stepped down in March, when the company also issued a profits warning, which saw shares plummet by 16% in one day.

The group also warned again today that revenue is expected to be “significantly below” 2006 as increased competition from other specialist mortgage providers continues to take its toll.

Kensington’s mortgage book was down £100m (€47m) at the end of April compared to the end of November and net interest income also dropped to 2.1% from 2.6% in the five months to April 30.

The group, led by new chief executive Alison Hutchinson, said the sale to Investec was at a “fair price” and would secure Kensington’s future as part of a stronger group.

Investec chief executive Stephen Koseff said: “We are confident that under our ownership, the Kensington franchise will be reinvigorated and that our combined businesses will be well placed to benefit from the growth of the non-standard mortgage market.”

Ms Hutchison, formerly managing director of Kensington Mortgages until her recent appointment to succeed Mr Maltby, is set to remain as chief executive after the recommended sale.

Kensington, founded in 1995, has struggled amid an increasingly crowed marketplace and has seen its arrears levels come under pressure as more debt-stretched sub-prime borrowers slip with repayments.

The group revealed in March that the arrears record for borrowers behind with payments for 90 days or more had increased to 9.8% at the end of February compared with 9.1% at November 30 last year.

It launched a strategic review of the group earlier this year which aims to drive annual cost savings of £8m (€11.77m) within two years.

Kensington also sold is direct-to-consumer arm TML to Customer Financial Solutions as part of the overhaul.