Blackstone walked away from Pepper Money talks, say sources

Pepper Money chief executive Mario Rehayem.

Fresh details have emerged about a possible deal involving the Kohlberg Kravis Roberts-backed Pepper Money.

There’s been chatter in recent days that Blackstone has held discussions about buying the business.

Blackstone declined to comment.

Sources said that while discussions took place, a deal never progressed because KKR’s price expectations were too high.

While there was no formal offer extended to KKR or Pepper Money, sources say KKR was holding out for a price valuing Pepper Money at about $1.85bn, whereas any interest by Blackstone would have been closer to the $1bn mark.

KKR owns 60.5 per cent of Pepper.

Pepper Money shares on Thursday were trading at $1.82 making its market value $830m.

Blackstone this year hired Pepper Group co-founder Mike Culhane as one of its senior managing directors after he worked for more than 14 years at Pepper Financial Services Group.

The understanding is he is working with a former colleague, Mark Glengarry, who heads up Blackstone’s Private Credit Strategies for the Asia Pacific in the Blackstone Credit and Insurance unit.

Blackstone, the former owner of asset manager and non-bank lender La Trobe Financial, is among other private equity firms that have considered buying Pepper Money, with others including BGH Capital and Apollo Global Management.

Culhane was group chief executive of Pepper Money from 2017 to 2024, then a director, but stepped down from the board in March.

He was co-chief executive from March 2011 to 2017 with Patrick Tuttle.

Pepper was floated on the Australian Securities Exchange in 2015 for about $1bn but was then purchased by Blackstone rival Kohlberg Kravis Roberts for $675.9m in 2017.

KKR sold off the international operations and relisted the remaining Australian arm, named Pepper Money, for $1.3bn in 2021, with KKR as the major shareholder.

DataRoom reported last month that an offshore group – now known to be Blackstone – had recently been running the ruler over Pepper, but it walked away after KKR’s price expectations were not met.

Non-bank lenders have been trading at discounted levels amid a high interest rate environment.

The RBA’s decision to hold rates in July could potentially keep prospective suitors on the sidelines for longer.

For the six months to December 31, Pepper Money generated $98.2m in net profit – down 9.7 per cent on the previous corresponding period.

It has $19.1bn of assets under management and generates earnings from home loans, asset finance and personal loans, and other servicing.