UK challenger bank Aldermore (ALD) has agreed the terms of a £1.1bn takeover offer by South Africa’s FirstRand.
The deal values the bank at 313p per share and is priced at a 22% premium to the price on the day before takeover talks were revealed (12 Oct).
Coinciding with the news is a strong set of third quarter results from Aldermore which go some way to demonstrate why the business is attractive.
Its net loans grew 12% to £8.4bn meaning the bank has already exceeded the £7.5bn achieved in 2016 as a whole.
Customer deposits are up 8% to £7.2bn year-on-year while it has also boosted its common equity tier 1 (CET1) by 0.3% in the quarter to 12.1%.
An increase in CET1, a bank’s buffer against economic shocks, may sometimes lead to an increased dividend. This is because the bank would give back any excess cash beyond its regulatory requirement to shareholders.
However, under the terms of FirstRand’s offer, if any dividend is paid it can reduce the offer amount for each share by the same amount as the dividend. Hence it’s unlikely the bank will pay a dividend.
‘Aldermore’s pretty glorious 2.5 years as an independently listed company appears all but over,’ says Investec analyst Ian Gordon. ‘We assume completion on the agreed terms within four months.’
