South African lender FirstRand has agreed a £1.1 billion takeover of British banking newcomer Aldermore Group to boost its business in developed markets.
The 313 pence per share offer represents a 22.3% premium to Aldermore’s closing price of 245 pence on October 12, the day before the companies announced they were in talks.
Aldermore is one of a group of so-called UK challenger banks that emerged after the financial crisis to fill a gap in small business lending and capitalise on problems at bigger lenders such as Royal Bank of Scotland and Lloyds.
However, they have been seen as ripe for takeovers recently after a prolonged period of low interest rates and sluggish British economic growth squeezed earnings.
The pound’s fall has also made them cheaper for foreign buyers.
FirstRand has been looking to return to developed markets following a rethink of its strategy prompted by slowing growth and rising risks elsewhere in Africa. It already runs MotoNovo, a vehicle financing business, in Britain.
African markets have been depressed by a slump in oil and other commodity prices – export mainstays of many economies – leading companies to scale back operations.
Aldermore was founded in 2009 by a former Barclays executive with backing from private equity firm AnaCap. AnaCap said it welcomed the news of the takeover.
FirstRand said that further growth could be unlocked in Britain through cross-selling the current product range across MotoNovo and Aldermore’s customer bases.
“It (Aldermore) will allow the FirstRand to allocate more financial resources to our operations in Africa, whilst diversifying earnings in the UK,” FirstRand’s CEO Johan Burger said.
Aldermore has been one of the better performing UK challenger banks.
It released its third-quarter earnings today, reporting higher nine-month new lending at £2.4 billion thanks to strong demand from small and medium sized businesses, homeowners and landlords.
Once the deal – which will be put to a vote by Aldermore’s shareholders – completes, FirstRand’s UK retail and SME operations will be joined with Aldermore, the African lender said.
Aldermore’s CEO Phillip Monks will head the new combined UK business.
“We’ve developed into a multiproduct diversified lender, and having spoken to FirstRand we can expand and accelerate that strategy in the UK,” Monks told Reuters.