London – In a surprising development, British lender Metro Bank has rejected multiple takeover approaches from rival Shawbrook Bank, according to a report by Sky News on Saturday.
The report revealed that Shawbrook, a specialist business lender, had made several offers to acquire Metro Bank over recent months, including a bid in late September. However, the Metro Bank board rejected all of Shawbrook’s approaches.
The exact valuation of Shawbrook’s bids is unknown, and it remains unclear if there are any ongoing discussions between the two mid-sized lenders. A potential deal would create one of the largest specialist banking groups in the UK and a formidable challenger to the established high street names.
The news comes at a turbulent time for Metro Bank, which has seen its shares plunge in recent days amidst reports it is urgently seeking to raise up to £600 million in new capital.
Metro Bank is scheduled to meet with major bondholders on Saturday to discuss a refinancing package worth over £500 million. According to Sky News, the aim is to finalise the deal in time to make an announcement when markets open on Monday morning.
The capital injection would shore up Metro Bank’s finances and ease pressures after a week of plummeting stock value and instability. Metro is hoping to reassure regulators and restore confidence after its disclosure of an accounting error earlier this year knocked investor trust.
Sky News said the lender’s preference is to avoid a full equity raise that would dilute existing shareholders. Instead, it is focused on debt options like issuing new bonds or loans, potentially backed by Metro Bank’s loan portfolio.
Shawbrook, which focuses on lending to property professionals, small businesses and consumers, could potentially have provided an alternative capital solution through a takeover. However, with the acquisition proposals rejected, Metro Bank now faces a race to secure new funding urgently.
Metro Bank was founded in 2010 as a challenger to the established big banks, promising customer service and convenience. It expanded rapidly to 67 branches, gaining over 2 million retail and business customers.
However, it fell into difficulties earlier in 2019 after revealing it had incorrectly classified a major part of its loan book, resulting in a £900 million adjustment to its balance sheet. This triggered regulatory probes, a 95% share price fall, and the departure of Metro Bank’s chairman and CEO.
New leadership under CEO Daniel Frumkin has been trying to steady the ship and restore Metro Bank’s finances. But investor confidence remains fragile, as reflected in the heavy selling this week. The successful refinancing package now appears crucial.
Shawbrook, which considered acquiring Metro Bank to accelerate its own growth ambitions, will likely have to pursue other expansion opportunities. Analysts speculate it may alternatively bid for rivals like Aldermore or OneSavings Bank.
With Metro Bank signaling it intends to remain independent, its board now faces a pivotal weekend determining the lender’s future. The stakes are high, with major investors ready to provide a cash injection if Metro Bank can assure them of a credible strategy to rebuild the business.
The coming days will indicate if Frumkin’s new team can re-establish Metro Bank as a secure retail banking platform able to stand alone. Or if rejection of Shawbrook’s takeover interest represents a missed opportunity to swiftly bolster the lender’s fragile finances through a merger.