Last month, Metro Bank’s board rejected a confidential takeover bid from British bank Shawbrook, just before Metro Bank’s share price plummeted due to its need for hundreds of millions of pounds to shore up your financial position. Shawbrook has made several bid proposals for Metro Bank, the most recent of which was presented in the second half of September.
The news comes just ahead of a scheduled meeting between Metro Bank bondholders and company executives to discuss a financial package in excess of £500m. The aim of these discussions is to hammer out a deal before the London Stock Exchange opens on Monday. Analysts suggest that Metro Bank may have to consider selling the company if alternative plans, such as a bond-led refinancing or a separate capital raising, fail.
Over the weekend, City sources reported that Shawbrook’s recent advances were rejected by the High Street retail bank. It is not yet clear whether there are active discussions between the two companies and the value of Shawbrook’s offers has not been determined.
Metro Bank’s board did not disclose the proposals to the stock market. The emergence of a potential buyer may raise questions about the directors’ decision not to engage in constructive discussions, given the company’s need to strengthen its balance sheet. Shawbrook is also one of a handful of banks vying to buy the Co-operative Bank, which is currently up for sale.
Metro Bank, which is being advised by Morgan Stanley, Moelis and Royal Bank of Canada, plans to raise at least 100 million pounds from a share sale. However, the viability of this plan is questionable given the significant drop in the price of its shares. In 2018, the bank, which pledged to revolutionize retail banking when it opened its first branch in London in 2010, had a market capitalization of £3.5 billion.
Further details of the bondholders’ proposals, which are being advised by PJT Partners, were unclear. A source described the situation as “fluid”, but confirmed that discussions were expected over the weekend.
Metro Bank was the first new lender to open on the UK high street in over a century when it launched in 2010. It has 2.7 million customer accounts, making it one of the ten largest banks of the United Kingdom. The company employs approximately 4,000 people, operating from approximately 75 branches across the country.
Banking regulators and the Treasury are closely monitoring Metro Bank’s capital-raising plans for any signs of increased deposit withdrawals. Rumors about his finances have been circulating for years. In 2019, customers formed significant queues at some of its branches after suggestions circulated on social media that they were in financial difficulties. Days later, it unveiled a £350m stake in a move designed to ease those concerns. Metro Bank has had a checkered history with city regulators, despite its relatively short existence. Last December, the Financial Conduct Authority fined it £10m for publishing incorrect information to investors, while the PRA hit it with a £5.4m penalty for similar offenses a year earlier. The lender was founded in 2009 by Anthony Thompson, a financial services entrepreneur, and Vernon Hill, an American who eventually left under controversial circumstances in 2019. Metro Bank has been forced to sell assets in the past, announcing an agreement in December 2020 to sell a portfolio of owner-occupied residential mortgages to NatWest Group for up to £3.1 billion.
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