- Unconfirmed takeover talks see analysts eye potential Shawbrook tie-up
Metro Bank shares rose sharply on Monday after rumours of a looming private equity takeover bid emerged over the weekend.
The lender has been approached by London-based Pollen Capital about a potential takeover in early-stage informal talks in recent weeks, according to the Financial Times.
Any potential deal could call time on a turbulent period as a publicly listed company for Metro Bank, which has seen its value plummet since its 2016 IPO.
It would also mark another potential blow to London’s shrinking public markets, which have faced 30 bids of more than £100million for UK-listed companies already this year.
Pollen Street and Metro declined to comment on the potential deal.
Metro, which was the first new UK high street bank in a century when it opened its debut London branch in 2010, has lost almost 95 per cent of its value since listing after a string of regulatory setbacks.
Metro Bank’s market capitalisation has plummeted from its 2018 peak
It was also forced into an emergency fundraise in 2023 after shares halved in the wake of a regulatory breach related to changes to the capital requirements on the bank’s mortgage book.
Its market value has shrunk from £1.6billion at IPO to £755million as of Monday morning.
The decline invited a takeover bid from specialist lender Shawbrook in 2023 that was later rejected.
Metro has since shifted away from retail banking, despite a recent pledge to expand its brand network, and towards specialist lending to businesses and SMEs.
Analysts at KBW Europe noted Pollen Street is also a major shareholder of Shawbrook and said there is ‘commercial logic in such a transaction’.
It added: ‘Shawbrook is delivering strong commercial loan growth but has relatively expensive funding.
‘Metro has ambitious plans to grow commercial lending that have yet to gather momentum, but has cheap current account funding.
‘The value for Shawbrook in maintaining asset growth momentum at the same time as reducing deposit costs is potentially significant.’
However, KBW said any transaction would depend on the willingness of Metro’s management and shareholders ‘to retire at this early stage in their strategy’, as well as Pollen’s ability to agree an acceptable price.
Metro Bank shares were up 14.8 per cent to 128.8p by midmorning, having rocketed 260 per cent over the last 12 months. However they remain more than 95 per cent below their early 2018 peak.
Peel Hunt analysts Stephen Payne and Stuart Duncan see ‘significant potential valuation upside for Metro’ if any deal emerges.
They said: ‘Using our forecasts, which assume a successful delivery of Metro’s transformation plan, and reducing the cost-of-equity discount rate suggests an ultimate valuation north of 200p is feasible.
‘This is clearly a bull case but comes into play in a bid scenario even though execution risk remains. Potential synergies also become a factor.’
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