US private-equity group Carlyle has until 2 December to make formal offer or walk away
Last modified on Fri 5 Nov 2021 01.28 EDT
Shares in Metro Bank surged by almost a third on Thursday after it received an approach about a possible takeover by the US private-equity group Carlyle.
The market value of the challenger bank, which did not say how much Carlyle might pay if a firm offer was made, soared by as much as 40% in early trading on news of the deal, valuing the bank at more than £242m, before closing up 29%.
“Metro Bank has engaged with Carlyle in relation to its possible offer and a further announcement will be made as and when appropriate,” the company said. “In the meantime, shareholders are advised to take no action.”
Carlyle has until 2 December to make a formal offer or walk away, under UK takeover rules. The possible offer comes as the bank continues to work to revive its fortunes after an accounting scandal in 2019.
The scandal resulted in the resignation of the chair, Vernon Hill, who founded the company in 2009, who had previously said that he would “probably die” before stepping down.
Metro’s chief executive, Dan Frumkin, who took up the top role last year, has previously worked with Carlyle. He joined from Bermuda-based Butterfield Bank, where he was part of the management team who helped to restructure the troubled lender after its acquisition by Carlyle in 2010.
The private equity group exited Butterfield via a two-stage listing on the New York Stock Exchange that completed in 2017.
Last year, Metro significantly scaled back expansion plans after reporting a loss of more than £130m caused partly by the accounting error.
The scandal prompted speculation that the bank may become a possible takeover target as its share price tumbled. Frumkin was promoted from chief transformation officer to the top role within months of joining Metro Bank as the scandal unfolded.
While Metro Bank’s share price is up more than 130% over the past year, to about 140p, it remains at a third of the 400p it was trading at three years ago. When the company floated on the stock market in 2016 it was valued at £1.6bn.
In July, Frumkin said attempts to revive its fortunes were “beginning to bear fruit”, with half-year pre-tax losses reducing from £240m to £139m year-on-year.
Earlier this year Carlyle, which declined to comment on the possible takeover, lost a £1.1bn bidding war for the inhaler firm Vectura to the tobacco company Philip Morris.
The private equity company has a portfolio of investments in the UK including the housing developer Beechcraft, video games producer Jagex, luxury clothing retailer END and global funds network Calastone.
In November, Carlyle exited PA Consulting after it was acquired by the professional services firm Jacob in a deal valuing the business at £1.
Last year Metro Bank moved to acquire the peer-to-peer lender RateSetter in a deal worth up to £12m.
Speculation about consolidation in the banking sector has been fuelled recently by hopes that rising interest rates might boost the future prospects of challengers which have struggled to compete against the high street giants.
On Thursday the Bank of England held the base rate at its historic low of 0.1%, but indicated it expects borrowing rates to rise in coming months.