South African bank Firstrand pays £1.1 billion to take over Aldermore

● UK ‘challenger’ outfit is seen as key part of diversifying buyer’s earnings

Another of the UK’S new entrant banks has been snapped up in a takeover, with South Africa’s Firstrand splashing out £1.1 billion to acquire Aldermore.

The offer yesterday from Firstrand, whose business interests range from investment and retail banking to asset management, is worth 313p per share. That is 22 per cent above Aldermore’s closing share price on 12 October, the day before the companies announced they were in talks.

Firstrand said yesterday that it aims to diversify Aldermore’s UK proposition, with the possible addition of services such as car financing, personal loans and insurance.

The UK bank, which floated on the UK stock market in the spring of 2015, currently focuses on small and medium-sized businesses, homeowners and landlords.

Firstrand chief executive Johan Burger said the transaction would build shareholder value “by achieving a more diversified revenue profile and we believe it will provide the platform to fulfil our growth objectives in the UK.

“It will allow the Firstrand Group to allocate more financial resources to our operations in Africa, whilst diversifying earnings in the UK.”

Aldermore also announced its third-quarter results yesterday, which saw net loans had risen 12 per cent to some £8.4bn, driven by £2.4bn of new lending. Customer deposits were up 8 per cent to £7.2bn. The group’s net interest margin – the difference between what it pays in saver interest and charges on loans – was stable at 3.5 per cent.

Phillip Monks, Aldermore’s chief executive, said the takeover “reflects our strong track record of delivery and Firstrand’s confidence in Aldermore to continue delivering on its sustainable growth strategy.

“With the backing of Firstrand Group’s considerable resources and wider capabilities, we will be able to accelerate the delivery of our strategy and further expand the products and services we offer customers”. He added that Aldermore’s “vision” was to bring more competition to UK banking, and Firstrand’s ownership would help it in that.

Other challenger banks to have been snapped up after floating on the stock market include TSB, spun out of Lloyds in June 2014, and then acquired by Sabadell of Spain for £1.7bn in June 2015.

Shawbrook, the specialist lender floated in the spring of 2015, was bought by private equity players Pollen Street Capital and BC Partners for £868m in June 2017.