FirstRand reaches agreement with UK target


FirstRand reaches agreement with UK target

Published Date: 2017-11-07 | Source: Stephen Gunnion | Author: Stephen Gunnion

FirstRand reaches agreement with UK target

The financial services group says buying Aldermore will help protect and build shareholder value

FirstRand says it's reached a deal with Aldermore to buy the UK challenger bank for £1.1 billion in cash, and Aldermore plans to recommend the deal to its shareholders. FirstRand says the 313p per share offer represents a 22% premium to Aldermore's shares on October 12, the days before it first announced the deal and a 38% premium to the three-month volume weighted average of the bank's shares prior to the announcement date. The offer implies a multiple of 1.8 times Aldermore's reported Net Tangible Book Value of £607.1 million at the end of September.

FirstRand says it will pay for the deal using existing cash resources. It says the deal fits its strategy to protect and build value through diversification - both by product and geography. It already owns UK motor finance provider MotoNovo, which contributes about 4% of group earnings. The rest is generated in South Africa, the rest of Africa and India.

Related article: FirstRand confirms interest in UK bank

Aldermore provides asset finance, invoice finance, mortgage and deposit products to small and medium-sized business, homeowners and landlords. It was founded in 2009 by funds advised by AnaCap Financial Partners. The UK's so-called challenger banks emerged after the global financial crisis to fill a gap in small business lending and capitalise on problems at the larger banks, like Royal Bank of Scotland and Lloyds. However, the weak UK economy and a prolonged period of low interest rates have dented earnings, making them vulnerable to takeovers. The weak pound has also made British companies cheaper for foreign suitors.

FirstRand says it plans to integrate its existing UK retail and business operations in Aldermore, with the bank's current CEO Phillip Monks leading the combined business.

FirstRand's shares gained 0.8% yesterday to close at R52.79.

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