Lender Amigo’s shares rise as suitors express takeover interest
Amigo, the loans company, has revealed that several companies have expressed interest in buying the business after the firm opened itself to offers at the end of January.
All or part of Amigo’s business could be sold after founder James Benamor’s Richmond Group said it was open to divesting its stake of 60.66 per cent.
The FTSE small cap firm said that it had entered into non-disclosure agreements with the interested parties but that there was no certainty that an offer would be made.
Shares in the firm jumped 11.5 per cent on the announcement today.
An industry source said that it thought for many companies Amigo was “too risky” a takeover prospect:
“Though Amigo may once have been seen as a genuine alternative to payday lenders, the sands have now shifted. Some will think it should have seen the regulatory pressure coming”.
The company, which loans money to people with poor credit ratings, has come under increasing pressure recently after a crackdown by regulator the Financial Conduct Authority (FCA).
The watchdog has heightened scrutiny of Amigo’s business model as it turns a hard eye on the type of loans offered by such companies.
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The FCA is currently reviewing Amigo’s system of allowing people to name guarantors as it is concerned that guarantors do not know the risks when agreeing to the repayment plan.
Amigo offers loans of up to £10,000 with a representative interest rate of 49.9 per cent APR.
When it launched the strategic review and sales process on 27 January, the firm said that it was fighting against a “challenging operating environment”.
“We are concerned that there may be increased pressure on our business and a continual evolution in the approach of the Financial Ombudsman Service (FOS),” Amigo said.
Complaints about the lender have more than doubled lately. In the first six months of 2019, the FOS received 266 new complaints about Amigo, up from 117 in the same period the year before.
Since the firm floated for £1.2bn in 2018, Amigo’s board has seen shares plunge 78 per cent.
In December, chief executive Hamish Patton said he would step down, whilst the firm is seeking to replace chairman Stephan Wilcke, who is also stepping down.