British bank Shawbrook Group Plc (SHAW.L) rejected an 842 million pound ($1.05 billion) buyout bid from a consortium of private equity firms, but its shares climbed on Friday on hopes of a higher offer.
The bank had already spurned the 330 pence a share approach from Marlin Bidco, co-owned by buyout funds Pollen Street Capital and BC Partners, earlier in March.
However, analysts saw Friday's formal bid as a means of leaving the door open for a higher offer, pushing shares up 11 percent to 338p, above the offer price and the highest in more than a year.
"It is our opinion that Marlin Bidco launched an offer for Shawbrook in order to buy time, as it faced a 5pm deadline to make an offer or walk away for at least six months," RBC Capital Markets analyst Peter Lenardos said, referencing UK Takeover Code's "put up or shut up" rules.
"We believe that a marginally higher offer is likely, as both parties have nothing to gain and much to lose by the failure to come to a successful agreement."
In January, the consortium made an offer of 307 pence per share, which it increased to 330 pence in March.
Pollen Street currently owns 38.8 percent of Shawbrook and the joint private equity groups said they have received letters of intent from other shareholders representing 6 percent.
In its statement, Shawbrook also noted the change in the deal structure to a takeover offer that is subject to the consortium receiving more than 50 percent of acceptances, from a scheme of arrangement.
Under the revised deal structure the company would be delisted if 75 percent of its shareholders accept the offer, with those who do not accept the offer remaining holders of shares in an unlisted company.
Shares in the company were floated at a price of 290 pence two years ago.
Britain's smaller challenger banks have been increasingly seen as ripe for takeovers in recent months as a prolonged period of low interest rates has squeezed earnings and the pound's fall has made them cheaper for foreign buyers.
Morgan Stanley is acting as financial advisor for the bidding party. The bank's board is being advised by Bank of America Merrill Lynch and Goldman Sachs.
(Reporting By Justin George Varghese and Rahul B from Bengaluru; Editing by Dasha Afanasieva and Keith Weir)