Wonga Spurns Bid Approach From Tech Giant
Wonga, the money lender which the Archbishop of Canterbury vowed to "compete out of existence", has spurned a tentative takeover approach from one of the world's largest technology investment funds.
Sky News has learnt that Silver Lake Partners, which is backing Michael Dell's $25bn (£15.6bn) buyout of the personal computing giant he founded, made a preliminary approach to Wonga's management and shareholders earlier this year about an outright bid for the company.
Wonga is understood to have rejected the approach on the basis that it significantly undervalued the UK-based company, which has recorded rapid profit growth since it was set up six years ago.
Silver Lake is said to have been mulling a joint bid with Andreessen Horowitz, the early-stage investor in firms such as Facebook and Groupon that is regarded as one of the pioneers of Silicon Valley's investment industry.
One of the world's biggest technology investors, Silver Lake raised a $10.3bn (£6.4bn) fund to invest in companies earlier this year.
Its current investment portfolio includes Alibaba, the China-focused e-commerce group that is planning one of the biggest-ever stock market listings. It has also been linked with a takeover of BlackBerry, the struggling mobile handset-maker but is reported to have rejected the opportunity to pursue a deal.
The value attributed to Wonga by Silver Lake's approach was unclear on Monday. One source said it had been more than £1bn but "well short" of the valuation that would represent a "baseline" for igniting interest from the company's executives or shareholders.
There are no live talks now taking place between Silver Lake and Wonga about a deal, the source added.
News of the approach from Silver Lake comes just weeks after Wonga reported a further surge in annual net profit to £62.5m, buoyed by growth at its UK and international operations.
Referring to the Church of England's desire to participate in the growing credit union movement, Dr Justin Welby, the Archbishop of Canterbury, said he had told Wonga chief executive Errol Damelin that he wanted to "compete [the company] out of existence".
The remarks sparked acute embarrassment for the Archbishop, however, when it emerged that the Church of England's pension fund was among the investors in one of Wonga's financial backers.
Wonga has sought to counter many of the criticisms levelled at payday lenders by pointing out that it only makes short-term loans to consumers and highlighting the fact that it only lends money to consumers who have been subjected to credit-checks. Customers can also repay loans early with no additional charge.
Earlier this year, the payday lending sector was referred to the Competition Commission amid political anger about the activities of some short-term lenders.
In 2014, the industry will come under the remit of the Financial Conduct Authority, and the City regulator will have powers allowing it to ban advertising and impose a cap on interest rates charged by lenders.
In remarks published on its website during the summer, Wonga said: "Since 2007 Wonga has responsibly lent over £2bn and we now have over a million customers.
"We've done that despite declining three quarters of all first loan applications and ensuring a principal default rate (money lent that we don't get back) of around 7%. This is comparable to other forms of short-term credit, such as credit cards.
"We work hard to lend only to the people who can pay us back, and our mainstream services for individuals and businesses are now available across three continents."
The record profits have fuelled speculation that Wonga's management and shareholders will look to float the company on New York's Nasdaq technology stock exchange, although such a move is unlikely in the near term.
Silver Lake and Wonga both declined to comment.