Shawbrook PLC (LON:SHAW) were higher this morning, extending Friday’s late leap which followed news of a private equity consortium bid approach to the small and medium-sized business-focused challenger bank.
By mid morning, Shawbrook shares were up 1.3%, or 4.2p at 320.7p, having jumped 18% higher on Friday after revealing that Pollen Street Capital - which already owns 38.9% of the lender - together with BC Partners have offered shareholders 330p per share in cash, plus entitlement to the 3p final dividend due for 2016.
Shawbrook said in its announcement on Friday that: “Discussions with the consortium are ongoing.”
Shawbrook was previously owned by Pollen Street, which until 2011 was part of Royal Bank of Scotland Group PLC (LON:RBS) known as RBS Equity Finance.
Pollen Street floated Shawbrook in 2015 at a price of 290p per share. The private equity firm placed a further 10% stake at 335p in November 15, and finally another 5.5% stake at 295.5p in May 2016.
Shares in Shawbrook traded below their listing price for much of last year, knocked by the bank’s shock news in late June that that it had taken a £9mln charge for bad loans after it discovered some lending at its asset finance arm did not meet its criteria.
Shawbrook is due to report its full-year 2016 results tomorrow.
Liberum looks for least 350p …
In a note to clients today, broker Liberum Capital pointed out that, on its forecasts, the 330p bid per share values Shawbrook at 9.5x 2017 EPS estimates and 1.6x price to forward book value.
However, Liberum’s analysts said: “We question whether the bid will be successful at 330p, given that it is only a 14% premium to our 290p price target.”
Repeating their ‘buy’ rating on the stock, they added: “We would expect the starting level for a successful bid to be at least 350p, which is 10x our 2017E EPS forecast."
The analysts concluded: “We believe today’s announcement should intensify bid speculation across the peer group which should be supportive for valuations.”