FirstBank willing to go hostile for Aldermore as analysts spy further bids

South African's FirstRand bank said on Monday it would be prepared to mount a hostile bid for smaller UK peer Aldermore if the challenger bank's board do not approve the deal.

Aldermore revealed on Friday it had received a conditional approach at a price of 313p per share, valuing the FTSE 250-listed bank at around £1bn.

FirstRand, which is valued at around £17bn, has a UK presence through its Cardiff-based subsidiary MotoNovo, a motor and asset finance lender with an asset finance book of circa £3bn.

On Monday, even though Aldermore said it was "likely to recommend a firm offer", FirstRand said it could waive the requirement for full board support.

Some analysts suggested there was the potential for a bidding war, with Peel Hunt saying the level of the indicative offer could tempt rivals to make a higher bid.

Analyst Ian Gordon at Anglo-South African bank Investec said Aldermore's shares "have been grotesquely undervalued for the past year" and that he regarded the 313p indicative was "reasonable, certainly not over-generous" and "most certainly falls short of our view of the value that an independent, low-risk, Aldermore should generate over the medium-term".

From a FirstRand perspective, he said the attraction was acquiring an "attractive, low-risk business at an undemanding valuation", MotoNovo should offer some synergies with Aldermore's vehicle finance, plus Aldermore's "material excess liquidity".

Shares in fellow challenger banks OneSavings and Virgin Money were boosted on Friday and Monday, with Gordon saying both rivals were also "mispriced".