Paragon shuns takeover bid

Buy-to-let specialist Paragon Group last week turned down a £373m takeover bid.

The deal would have valued the firm at 125p per share. At the time of writing its share price was 82p.

But John Heron, managing director of Paragon Mortgages, says the business is fully funded and running well and felt the 125p per share offer from the undisclosed bidder was too low. The firm will now put a freeze on buyout talks.

Following the announcement last Monday, speculation grew as to which private equity firm bid for the lender.

Bridgepoint Capital, Apollo Global Management and The Blackstone Group were all rumoured as potential bidders.

Bridgepoint was said to be conducting due diligence but had not made an offer, while Blackstone is understood to have withdrawn from the talks.

Heron says: “Our strategy has not changed. We are focussed on retaining customers and issuing further advances. We are still not accepting buy-to-let applications and that won’t change until we are clear about what is happening in the capital markets. Nevertheless we are fully funded and running well.”

Paragon says its board does not believe discussions with interested firms are likely to result in offers that it would consider acceptable.

It says the company has continued to trade in line with management’s expectations during the 11 months to August 31 2008.

There were small positive variances in net interest income and costs balanced by reduced income and increas-ed impairments in other areas.

John Goodall, private client research analyst at WH Ireland, says: “Given the current economic climate I am not surprised that deals such as the Paragon one are not going ahead.

“It may have been that investors are finding it hard to find the funds or just wanted to hold off until the market stabilises and confidence improves.”