The UK-based Metro Bank PLC (GB:MTRO) today announced a new financial deal amid takeover speculation from multiple UK lenders. The bank revealed on Sunday that it has secured a capital raise of £325 million, which includes £150 million of new equity by its major shareholders and £175 million of fresh debt provided by bondholders. The new package also includes debt financing for £600 million. This arrangement is expected to provide the bank with some relief and address a capital shortfall that led to discussions with regulators.
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Last week, the bank’s stock experienced a sharp decline of around 24% on Thursday after it faced challenges in securing new capital. The shares rebounded on Friday and gained 11%. Year-to-date, the stock has struggled and lost close to 70% of its value. Throughout the process, the bank has maintained that its financial position remains robust and that it continues to fulfill all regulatory obligations.
Metro Bank provides a comprehensive range of banking and financial solutions in the UK, with a primary focus on serving retail customers and catering to the needs of small to medium-sized businesses.
The New Deal
According to the new deal, Metro Bank’s largest shareholder, Jaime Gilinski Bacal, is poised to inject £102 million of the new equity, making him the majority shareholder. After the completion of the transaction, Spaldy Investments, an entity owned by Bacal, will hold a 53% stake in the bank. The bank’s Chief Executive, Daniel Frumkin, expressed that this development signifies a new phase for the bank, enabling it to sustain its expansion and anticipate increased profitability in the years ahead.
The bank is also attracting a lot of interest from big UK lenders like NatWest Group (GB:NWG), Santander UK (GB:SAN), Lloyds Banking Group PLC (GB:LLOY), and HSBC Holdings (GB:HSBA) to bid for certain segments of the Metro Bank.
The Bank of England’s Prudential Regulation Authority (PRA) is gauging the interest of these lenders and prefers the bids to be for the entire bank. However, these giants have ruled out the option to completely acquire Metro Bank without state support.
Is Metro Bank a Buy or Sell?
Recently, three days ago, Barclays assigned a Sell rating to the stock at a price target of 70p.
Overall, MTRO stock has received a Moderate Sell rating on TipRanks, based on one Hold and One Sell recommendation. The Metro Bank share price target is 100p, which implies a change of almost 150% from the current level.
