South African bank Investec has agreed to buy Kensington, the UK’s largest sub-prime lender, in a £283 million cash and share deal.

Kensington was put up for sale in February after an increasing number of defaulters led to its share price to fall from nearly £12 a year ago to some £5 today.

Some analysts claim the deal is far from sealed, given that several hedge funds have accumulated significant shareholdings in the company. A spokesman today however said the deal was as good as done, with CEO Peter Birch and existing staff expected to remain.

He added: “The takeover signals capital for investment, driving the company forward. We expect expansion.”

Paddington-based Kensington, which was set up in 1995, provides loans to people with poor credit ratings. Pre-tax profits in the last financial year stood at £49.1 million. Share prices rose in early trading today by 7p to 498p, with DPS at 23p.

Investec posted pre-tax profits of £16.3 million for the 12 months to March, rising from £6.6 million the previous year.