Small and medium-sized business-focused challenger bank Shawbrook PLC (LON:SHAW) said today it has rejected a bid approach from a private equity consortium including its 38.9% shareholder, Pollen Capital.
In a statement Shawbrook revealed that it first received a 307p a share offer approach from the consortium, which includes BC Partners, on January 13, which after negotiations was revised to 330p per share in cash, plus entitlement to the 3p final dividend due for 2016.
Following further discussions, however, and after consulting other large shareholders, the lender said it concluded that it is not willing to recommend the consortium's revised proposal, which has therefore been rejected by its board.
The bank said: “The Board remains very confident in Shawbrook's strategy as a publicly listed company, as outlined in the Capital Markets Day in May 2016, and in the ability of its current management team to deliver its plan, and is clear that its successful delivery and growth trajectory would generate significant shareholder value over the period to 2020.”
Bid consortium "surprised" ...
In its own statement in reaction to the rejection, the private equity consortium’s bid vehicle, Marlin Bidco said it is “surprised by Shawbrook's decision … given the friendly and open nature of its discussions.”
The bid vehicle said it “believes Shawbrook will benefit from being returned to private ownership, allowing it to adopt a more flexible approach in an uncertain economic environment, while retaining capital to ensure the prudent growth of the business and build up a long-term through-the-cycle lending track record.”
It concluded: “Marlin Bidco is considering its position and there can be no certainty that any transaction will proceed. Further announcements will be made in due course as appropriate.”
The consortium now has until the market close on March 31 to either make a formal offer for Shawbrook or walk away.
The bid rejection came as Shawbrook posted its 2016 results.
In a separate statement, the lender revealed a 14.1% rise in full-year underlying pretax profit to £91.4mln, up from £81.0mln a year earlier.
The bank's loans and advances to customers rose by 22% to £4.05bn.
Momentum continues ...
In its outlook statement, Shawbrook said that “although there remains macroeconomic and regulatory uncertainty, the momentum we have seen in our results and the pipeline we continue to build for 2017 and beyond as we continue to invest in our platform gives confidence in our ability to continue to deliver strong and stable returns whilst we grow the business at a pace appropriate to market conditions as they unfold.”
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.
After an 18% surge late on Friday, when it first revealed the bid approach, and further gains yesterday, Shawbrook shares closed trading yesterday at 319.3p.
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.
In early trading today, in reaction to the bid rejection, Shawbrook shares shed 3.8%, or 12.20p to 307.1p.
In a note to clients, analysts at Liberum Capital said: “ We previously questioned whether the bid would be successful at 330p, given that was only a 14% premium to our 290p price target and since the take-out multiples were not overly generous in our view.”
They added: “Despite Shawbrook's assertions that it remains confident in its strategy as a public company, we do not rule out a further third improved bid by the consortium.”
On the results, the analysts said: “2016 underlying PBT was in line with our forecasts, although we note that the cost of risk was slightly ahead and the ending loan book 3% below.”
-- Adds reaction from Marlin Bidco --