March 25 (Reuters) - Australia's Pepper Money

said on Wednesday it has rejected the takeover proposal from

Challenger as the offer was not "reasonably capable of

execution, a week after the bidders lowered the price citing

worsening market conditions.

The offer had valued Pepper Money at A$1.01 billion ($706.09

million).

Challenger, along with majority shareholder Pepper Group,

first tabled an offer to acquire Pepper Money in February for

A$2.60 per share, valuing the non-banking lender at A$1.16

billion.

The firm, however, reduced its takeover offer to A$2.25 per

share, last week due to the ongoing deterioration in both market

conditions and the operating environment.

The revised offer was at a 6.6% premium to Pepper Money's

last close on March 16.

Pepper Group ANZ HoldCo, Pepper Money's top shareholder with

an about 60% stake, is a unit of Pepper Global Topco, which is

in turn owned by U.S. private equity firm KKR.

Pepper Money said the talks had fallen through after its

independent board committee determined the revised offer was

beyond execution, prompting the firm to end the takeover talks.

"IBC has decided not to proceed with the transaction and

discussions with Challenger in relation to the revised proposal

have now ceased," Pepper Money said in its statement.

The firm also said as at the end of February, application

flow continued to show upbeat momentum in both mortgages and

asset finance.

If the offer had gone through, Pepper Money would have had

to leave the stock exchange for the second time in its history.

Founded in 2000, the firm was first listed on the Australian

stock exchange in 2015 before KKR took it private in 2017.

Pepper Money was then relisted in 2021 in what was then

Australia's biggest initial public offering of the year.

($1 = 1.4304 Australian dollars)