Paragon Group of Companies has become the focus of a potential private-equity bidding war with Blackstone leading the pack, while TPG, which pulled its proposed investment in Bradford & Bingley (B&B) last month, is also understood to have taken an interest.
The beleaguered buy-to-let-mortgage supplier Paragon revealed yesterday that it had become the focus of at least two takeover approaches in a statement to the market, with analysts predicting the deal could be "well below" its value of about £630m.
It released a statement yesterday, which said: "The board of Paragon confirms that it has received approaches from parties who have expressed interest in evaluating potential offers for the company". It declined to name the suitors.
The statement added that the group had entered into "exploratory discussions with, and is providing certain due diligence access to, the parties concerned" to determine whether the approaches could lead to acceptable offers.
Paragon has called on the Swiss investment banking group UBS to advise on the talks. Its shares closed up 31 per cent, or 26p, at 110p.
A source close to the talks confirmed that Blackstone was among those to have approached Paragon. Market experts added that the other interest was unlikely to come from UK banks, but buyout firms looking to pick up a group whose share price has fallen almost 90 per cent since August.
TPG, which has been a keen investor in distressed financial groups, has "had a look" at Paragon, according to insiders. One said: "There is a watching brief, although the interest may not be extremely serious. TPG is unlikely to get into a war with Blackstone."
This comes just weeks after the American private equity group pulled its £179m rescue investment in Bradford & Bingley at the 11th hour. The decision not to invest after Moody's lowered B&B's credit rating by a notch scuppered the bank's plan for an investment and a rescue rights issue, and angered some in the City.
Some analysts speculated yesterday that potential alternative investors including JC Flowers and Kohlberg Kravis Roberts could battle for the asset. Both firms declined to comment. Clive Cowdery's Resolution, which was thought to be interested in Paragon after his investment plan for B&B collapsed, is not thought to be among those to have approached Paragon in the run-up to the announcement.
Rae Maile, a managing director at Cazenove, valued the buy-to-let mortgage company at £630m yesterday, through a heavily discounted view of five years' net income, shareholder funds and a discounted view of its net asset value.
He said: "The opportunity for the potential bidder is that shareholders would rather count on an immediate bid than potential future value, with the result that an offer may be pitched well below any estimate of fair value and still be successful."
News of interest in Paragon comes a week after the British bank Alliance & Leicester agreed to be bought by the Spanish group Santander, which owns Abbey. The Spanish group picked up A&L for £1.26bn, less then half its value when the deal had been mooted the previous year.Reuse content