Investors told to say no to challenger bank buyout
LESS than two years after listing
Shawbrook Bank on the stock market, the private equity firm which took it to flotation is trying to buy it back.
Pollen Street Capital has put in an offer for the challenger bank with buyout specialist BC Partners. The duo offered 330p a share for the business, which specialises in lending to small companies, valuing it at £825m.
But experts have been left confused by the move to take the bank private again. Pollen Street first invested in the lender in 2011, the same year it launched. By June 2014 the bank’s balance sheet had grown from just £20m to more than £2bn and it had more than 100,000 customers.
The private equity firm, whose previous investments include travel cash provider MoneyCorp and loan broker Freedom Finance, listed Shawbrook at 290p a share in April 2015. It still holds a 38.9pc stake in the business.
BC Partners’ current investments include US retailers Pet Smart and UK dining chain Cote. The bid was confirmed minutes before the market closed on Friday, sending Shawbrook shares to a late rally.
The bank, which is due to publish its results today, said discussions with the consortium were ongoing. But City analysts don’t think shareholders should leap yet.
Numis said investors should not accept the offer and Peel Hunt said it underestimated the firm’s potential growth. Liberum said a successful bid would need to be at least 350p a share. Experts say it could be a sign of the potential the challenger banking sector has to offer – many expect counter offers to emerge before the end of the month. Numis said: ‘Consolidation is needed in the sector but none of the lenders currently has the scale to make an acquisition.
‘It could be that Pollen Street has spotted that need and wants to make Shawbrook its vehicle to drive consolidation while share prices are low.’
Peel Hunt said it was positive for the sector and increased its target price for Aldermore (down 2.3pc, or 5.5p, to 233.5p) and OneSav
ings ( down 1.8pc, or 7.4p, to 391.7p). Shawbrook nudged up 0.9pc, or 2.8p, to 319.3p.
The FTSE 100 closed down 0.3pc, or 24.1 points, at 7350.1.
Standard Life was the highest riser of the day, up 5.7pc, or 21.5p, to 398.6p, as investors jumped on board as it confirmed its merger with Aberdeen Asset Management (up 4.1pc, or 11.9p, to 298.3p).
Acacia Mining continued its fall after it emerged on Friday that the president of Tanzania had put a ban on gold and copper exports. Acacia has three producing mines in the country, where it generates about a third of its revenue. There have been no further updates out of the country as yet but fearful investors sent shares tumbling another 10pc, or 46.1p, to 414.9p.
Ultra Electronics advanced after revenue rose 8.2pc to £785.8m. In its preliminary results the defence and aerospace firm said underlying operating profit was up 9.3pc to £131.1m in 2016. While delays to a number of contracts affected shortterm revenue, Ultra said it had been a better year and its growing profit reflected cost control. It said the global defence sector looked to start growing again, fuelled by expected higher spending in the US. Shares gained 4.8pc, or 95p, to 2077p.
Plant Impact said a weaker pound helped boost revenue 17pc to £4.9m in the six months to January 31. The AIMlisted firm, which is involved in crop enhancement technology research and development, saw profits rise 18pc to £3.9m. Despite the positive update, shares slipped 3pc, or 1.5p, to 49p.