Shawbrook Group plc (LON:SHAW) has responded to a hostile bid from private equity firms, saying the revised offer undervalues the challenger bank.
Pollen Street Capital, which owned Shawbrook before floating it on the stock market two years ago, and BC Partners raised their offer by £26mln to £868mln in a final attempt to convince shareholders to accept the deal.
An earlier offer of 330p per share plus dividend had received approval from shareholders representing 6.6% of the stock together with Pollen’s 38.8% stake.
The total acceptance level was 45.5%, short of 50% needed for approval of the deal.
The new bid is 340p a share, plus a 2.7p dividend the bank announced in March. If the private equity firms receive 75% backing or more for the offer, the bank will be de-listed.
The final offer marks a 28% premium to the closing price of 267.8p on 2 March, the day before the stock jumped on news of the bid.
However, it is only 0.1p higher than its closing price of 339.9p on Friday.
Shawbrook’s independent directors have advised shareholders to take no action on the offer as they believe it undervalues the company and its prospects.
The lender said the directors think Shawbrook can “continue to grow prudently over the medium term within its risk and return disciplines and achieve its upper quartile return on equity objectives”.
“However market conditions in the near term remain competitive on risk and return dynamics and, as previously signalled, Shawbrook will need to maintain its disciplined approach to returns and risk over absolute quantum of originations in order to generate upper quartile returns for shareholders,” Shawbrook added.
Shawbrook began trading at 290p a share in April 2015, valuing the stock at £725mln. But like other challenger banks, its earnings have been squeezed by a prolonged period of low interest rates.
The sector has also seen a rise in takeover bids as the pound’s drop since the Brexit vote in June has made challenger banks a prime target for foreign buyers.