Metro Bank

Metro Bank agrees to acquire RateSetter

Metro Bank has announced that it has agreed to acquire Retail Money Market LTD (RateSetter).

The acquisition is for initial consideration of £2.5m, with additional consideration of up to £500,000 and further consideration of up to £9m payable on the third anniversary of the completion of the transaction, subject to the satisfaction of certain key performance criteria.

This deal does not include RateSetter’s holding in RateSetter Australia, which is being retained by RateSetter shareholders.

RateSetter was founded in 2010 and is a “popular” UK P2P lender with over 750,000 people having invested or borrowed through the platform.

In its financial year ending 31st March 2019, the company reported revenue of £33m, a pre-tax loss of £8m and gross assets of £42m.

Since inception, the business has originated £4 billion of lending.
It primarily originates unsecured personal loans and arranges secured auto dealer financing and property finance. 

As a P2P platform, it connects investors with borrowers and therefore does not hold deposits or loans on its balance sheet. 

As part of its strategy to enhance returns, Metro Bank has previously signalled its ambition to grow unsecured lending.

Following completion, the bank will use its deposit base to fund all new unsecured personal loans originated via the RateSetter platform on its balance sheet. 

The P2P lender will continue to manage its existing loan portfolio and provision fund, on behalf of its existing investors, with Metro Bank assuming no credit risk for these existing loans. 

The acquisition brings a talented team, including co-founders Rhydian Lewis and Peter Behrens and CFO Harry Russell.
Rhydian Lewis will join Metro Bank's executive committee and will report directly to Metro Bank's CEO, Daniel Frumkin.

The transaction will be funded from existing cash resources, while the final fair value and goodwill elements will be determined as part of the company's year-end accounting process. 

The acquisition is conditional upon approval from the FCA and shareholders holding at least 60% of RateSetter’s shares and is expected to close by Q4 this year.

The board of directors of RateSetter unanimously recommends the transaction. 

Shareholders holding 45.7% of RateSetter’s shares have signed the relevant transaction documents on 3rd August.

Daniel Frumkin, CEO at Metro Bank, said: "The ability to enhance our offer of unsecured lending to our customers is an important strategic ambition as we continue to evolve the bank and increase our returns. 

“RateSetter is an established business with a strong technology platform and a talented team who have deep experience in the consumer unsecured lending market. 

“This acquisition therefore accelerates our plans, helps us to better meet the needs of our customers and further strengthens our position as the UK's best community bank." 

Rhydian Lewis, CEO at RateSetter, added: "I am excited at the prospects of this combination. 

“RateSetter and Metro Bank share a focus on delivering something better for the customer and the strategic logic of pairing [the bank’s] strong deposit base with our lending capability is compelling. 

“Metro Bank is admired for its fresh approach to banking and I am looking forward to helping the bank expand its offering and meet more customer needs."

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