Shawbrook board reject improved Pollen Street-BC deal

The challenger bank's independent directors believe that the offer contnued to undervalue Shawbrook and its prospects "and therefore advise that shareholders take no action".

The £868m offer from Pollen Street and BC's Marlin Bidco on Monday will remain open for acceptances until 1300 BST on 19 June.

The private equity firms, which already have a 38.8% stake in Shawbrook, had received acceptances from investors holding another 6.6% of the shares for their previous offer of 330p a share, leaving them short of the 50% backing required for the deal to proceed.

Analysts at Shore Capital earlier in the week said they continue to believe that Marlin Bidco will eventually gain the number of acceptances required to gain control, even though they believe a fair value of at least 450p can be justified.

Meanwhile, Investec said the improved offer undervalues Shawbrook on a 12-month view, and considerably undervalues the business if management is able to deliver against its '2020 vision' presented to the market in May 2016.

Shawbrook's board believe the bank "can continue to grow prudently over the medium term within its risk and return disciplines and achieve its upper quartile return on equity objectives".

"However market conditions in the near term remain competitive on risk and return dynamics and, as previously signalled, Shawbrook will need to maintain its disciplined approach to returns and risk over absolute quantum of originations in order to generate upper quartile returns for shareholders."

Marlin Bidco said that if its offer closes with acceptances of more than the minimum acceptance level of 50% but with 25% or more of shares remaining in public hands, Shawbrook would be kept as a listed company.