Kensington admits to takeover talks with a ‘limited number’ of suitors

Kensington Group has admitted this month it has had takeover discussions “with a limited number of parties” that have approached it.

The lender says the discussions are “at an early stage and there can be no certainty that these discussions will lead to an offer for the group”.

The admission follows the departure of chief executive, John Maltby on March 23 when the group also issued a profit warning.

Speculation Kensington could be the subject of a takeover battle began at the start of the year after Goldman Sachs increased its shareholding in the lender to 17%, while Morgan Stanley was also believed to be ready to make a bid for Kensington. In February the lender appointed NM Rothschild to review its strategic options while loss-making The Mortgage Lender was also sold at the end of January.

Nick Baxter, director of Mortgage Promotions says the news Kensington has been approached by potential buyers should not come as a surprise. He says: “It is inevitable any well run public limited company is going to come under takeover attempts whether they are hostile or non-hostile. If Kensington is trying to negotiate a non-hostile takeover that has to be good news.”

The lender’s latest trading statement issued for the first quarter of its new financial year, to February 28 2007 makes for uncomfortable reading, with Kensington stating it is still not possible to give specific guidance on its longer-term profitability. It also expects profits in the future to be lower than current market estimates.

Completions at Money Partners are down by 12% compared with the same period last year.

Total new business completions for the group as a whole are over 855m, an increase of more than 4% compared with the same period in 2006 with the total offer pipeline up 24% over 2006 to 469m.

But the mortgage book was 6.9bn at the end of February, down from 7.2bn at the end of November 2006.

The group’s average gross margin for first-charge new business, including its recently launched specialist prime range, was relatively flat compared with Q4 2006 at 2.6% but was down from 2.9% in the same period in 2006.

Kensington says: “Given the current competitive market conditions we continue to assess the merits of increasing the proportion of whole loan sales. As previously announced, the group continues to progress its strategic review and expects to provide an update in the pre-close trading statement on May 30 with its full conclusions being provided with the interim results to be announced in July.”