JOHANNESBURG - Firstrand has offered to buy UK challenger bank Aldermore Group for about $1.3billion (R17.23bn).
This was confirmed by FirstRand in a statement issued to the market on Friday after the Aldemore Group said it was in talks with South Africa’s biggest lender by market value.
FirstRand said it has been assessing opportunities to build a sustainable long-term deposit franchise to fund its strategy to grow and diversify the revenues of its current UK business. “The possible acquisition of Aldermore, with its unique operating model, market positioning and strength in deposit taking, would provide the ideal platform for FirstRand to fulfil this strategy on an accelerated basis,” FirstRand said.
Aldermore, founded in 2009 by a former Barclays executive with backing from private equity firm AnaCap, said it had received an indicative proposal from FirstRand of 313pence (R55.10) a share in cash and the Aldermore board has indicated to FirstRand that it is likely to recommend a firm offer at this level. The proposed offer is a 22.2percent premium to Thursday’s closing price. Industry analysts said they were not surprised by FirstRand, because South Africa is battling with low economic growth.
Ron Klipin, an analyst at Cratos Wealth, said growth in the country has become flat for some time now and FirstRand has seen opportunities in the UK. “Aldemore might not be a traditional bank, but FirstRand has an opportunity to diversify its revenues in the UK as business confidence in the country is low and consumer spending is subdued currently as they are not spending,” Klipin said. He said companies in South Africa might not have that risk appetite anymore and will go into other markets for growth.
At the close of the markets on Friday Aldermore’s shares were up 18.8percent to 304.2p while FirstRand’s shares closed 1.89percent lower at R53.35.
FirstRand said the making of any firm offer would be subject to the satisfaction of a number of pre-conditions, including due diligence to the satisfaction of FirstRand, and the unanimous recommendation of the Aldermore board.
“There can be no certainty that any firm offer will be made,” it said. Ian Cruickshanks, chief economist at the SA Institute of Race Relations, said FirstRand had advanced a great deal in technology and it could hold its own in the advanced markets like the UK. “FirstRand is certainly leading the race in terms of technology in their sector and it can easily compete in that market. I also think FirstRand don’t see a lot of development in the country and had to look elsewhere for growth, which is sad for the country.”
He added that FirstRand saw the opportunity and decided to act on it. “However, should the deal go ahead it would be interesting to see how Aldermore performs in the future. We might have to wait for year one and year two results to see if this would be a good acquisition for FirstRand.”
Cruickshanks said political uncertainty in the country and low and an unwelcoming business environment was setting the country backwards and South African companies were losing confidence in the country and that was why they looked outside for growth.
FirstRand is required, by no later than November 10, either to announce a firm intention to make an offer for Aldermore in accordance with the UK’s takeover rules. FirstRand said it would update the market about the developments.
- BUSINESS REPORT