Metro Bank’s mad dash for cash

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In today’s newsletter:

The regulatory saga that left Metro Bank in a pinch

Metro Bank hasn’t exactly been on a tear in recent years. But the past week has been especially rough.

The UK challenger bank has sounded out rivals including Lloyds Banking Group, NatWest and HSBC about buying a third of its mortgage book to help bolster its balance sheet, as the lender’s chair met financial watchdogs following news of a plan to raise up to £600mn from investors on Thursday.

The meeting between Metro’s chair Robert Sharpe and officials from the Bank of England’s Prudential Regulation Authority and Financial Conduct Authority was the latest in a series of contacts between regulators and the bank over the past month as its situation has grown increasingly dire.

“They are attractive prime assets, so it will just come down to price,” one of the people familiar with the talks said of its mortgage book.

Bargain hunting will probably ensue. Shares in the mid-tier UK bank have lost 98 per cent of their value since it listed in 2016, with its stock plummeting nearly 30 per cent on Thursday following the FT’s report that it was seeking to raise up to £250mn in equity funding and £350mn of debt from investors.

The trouble began in mid-September, when Metro conceded it would not get capital relief from the Bank of England for mortgage lending until at least 2024.

Challenger banks such as Metro, the first of a crop of high-street disrupters in the wake of the financial crisis, have been pushing to change the way they calculate the riskiness of loans as financial reforms due to come into effect in 2025, known as Basel IV, tick closer.

Such a move would boost profitability on a return on equity basis, because it would be required to hold less equity — earning more for shareholders in the process.

Unfortunately for Metro, it’s looking more and more like the capital relief will have to come from mortgage sales and investors instead.

It’s understandable why some investors may not want to foot the bill. The situation caps off years of self-inflicted pain for Metro, which in 2019 was at the centre of a misreporting scandal that prompted its chief executive and chair out the door.

The regional banking crisis that took down the likes of Silicon Valley Bank, Signature Bank and First Republic Bank hasn’t exactly been good PR for their UK challenger peers.

Metro has enlisted bankers at Morgan Stanley to provide advice and lead any potential capital raise, said a person familiar with the decision.

The biotech takeover pitting a company against its founder

The UK life sciences company Abcam has come out fighting against its founder Jonathan Milner, insisting that there was a robust and competitive process before it accepted a $5.7bn takeover offer by US group Danaher, the FT’s Hannah Kuchler reports.

In a letter from the chair to shareholders published on Thursday, Abcam gave its blow by blow account of the saga. It began in May when Milner, who founded the company in 1998 but stepped down as chief executive in 2014, decided he wanted to rejoin the board, concerned about what he saw as underperformance.

The detailed timeline shows that while Abcam was weighing up Milner’s requests, it was entertaining acquisition offers.

Milner has said the Danaher offer undervalues the company, which makes supplies for labs such as custom antibodies. He told the FT last month that there was a “smoking gun that this was not a fair and full process”. He plans to vote against the deal, unseat the board and take over as CEO.

But on Thursday, Abcam showed the timeline — including almost 900 words about their activity on a single day — of how it considered other offers and accepted the highest one. The company said the closest definitive offer was from “Party B” of $22.50, and it pushed Danaher to increase its original offer of $20.50, first to $21.50, then to the final $24.

Now, shareholders will have until the general meeting on November 6 to cast their votes on the Danaher deal, and show whether they believe Abcam when it says there are no better offers waiting in the wings.

Job moves

• Law firm Fried Frank has named private equity head Kenneth Rosh as its next chair, succeeding David Greenwald. It also named mergers and acquisitions co-chair Steven Epstein as managing partner and litigation co-chair Scott Luftglass as vice-chair.

• Barclays is planning to cut about 50 senior dealmakers, Financial News reports.

• The Investment Company Institute Board of Governors has named Neuberger Berman boss George Walker as its next chair and State Street Global Advisors president and CEO Yie-Hsin Hung as vice-chair.

• BlackRock has hired Morgan Stanley’s Patrick Haskell as head of municipal bonds. He will replace Peter Hayes following his retirement early next year, according to an internal memo seen by DD.

• Goldman Sachs partner Michael Ungari has quit to join Strategic Value Partners, Bloomberg reports.

• Freshfields has hired Doug Bryden as an ESG partner in London. He will join from Travers Smith.

• British American Tobacco has named former Perrigo chief executive Murray Kessler as a non-executive director.

Smart reads

After the fall The tragic accident of Janus Henderson executive Sarah de Lagarde has revealed grave safety issues in London’s underground railway, as told in FT Magazine.

Alameda’s secret backdoor Ahead of its collapse, some FTX employees had already discovered how Sam Bankman-Fried’s trading firm allegedly withdrew billions of dollars of customer funds from the cryptocurrency exchange, The Wall Street Journal reports.

Shaking up the news The Wall Street Journal’s new editor Emma Tucker has wasted no time in making sweeping changes across the organisation, The New York Times reports.

News round-up

Metro Bank chair meets UK financial watchdogs (FT)

Casino seals cash injection from group led by Daniel Křetínský (FT)

Alibaba accused of ‘possible espionage’ at European hub (FT)

Teck says sale of steelmaking coal arm proceeding as planned (FT)

China jitters turn private equity investors towards India and Indonesia (Nikkei Asia)

The DoJ vs Google: complaint against search giant still faces a high bar (FT Opinion)

PayPay: QR the one to lighten SoftBank’s gloom (Lex)

Fox searches for link between George Soros and Smartmatic (FT)