Marlin Bidco (Pollen Street & BC Partners) says it has secured agreement of 46% of shareholders
Companies: Shawbrook Group
Challenger Bank Shawbrook says it has had a solid start to the new financial year, with loan originations increasing 4% to £500m in the three months to 31 March, as its management continues to stand firm against Marlin Bidco's takeover offer.
Consensus forecasts for the year expect the firm to hit revenues of £252m, with a net profit of £94.5m, +46% YoY. Its EPS is expected to be flat compared to last year after significant share price gains in the past six months.
As well as giving a trading update on Tuesday, Shawbrook also published its response to the bid by Marlin Bidco, confirming that the Board's independent directors were not able to recommend the offer.
The bank's board announced further details as to why it was still recommending shareholders reject a buyout offer from Marlin Bidco (Pollen Street and BC Partners). In a letter sent to shareholders, the company's independent directors said investors should "...take no action in relation to the offer and should not sign any document sent by Marlin Bidco or its advisers".
The unwelcome bid will cost Shawbrook at least £4m in one-off costs if it is unsuccessful, and between £9m and 12.5m (ex VAT) if successful. Marlin Bidco claims it has secured support from more than 46% of shareholders to date, with 50% support required to push through the deal.
Panmure Gordon said the update was in line with its expectations, adding that it believes the bid from Marlin Bidco still undervalues growth and potential returns. Panmure expects a successful bid to be more than its target price of 355p.
"Group originations were £495m up 4% YoY despite strong comparisons, especially in BTL which reduced by 12% YoY. Net loans increased by 3% QoQ to £4.2bn. NIM was broadly flat at 5.5% (FY2016 5.6%) and in line with our expectations for 2017. The group continues to believe that it can grow prudently and yet generate returns in the upper quartile of the target range of ROTE 22-25%. However, there will be significant one-off costs associated with the bid, in the region of £4.0m (excluding any applicable VAT) if the bid is aborted or unsuccessful and between £9.0m and £12.5m (excluding any applicable VAT) if the bid is successful."
Shawbrook's share price opened flat on Tuesday and has increased 140% since July.