(Reuters) - British challenger bank Shawbrook Group Plc (SHAW.L) said it rejected a raised and final 868 million pounds ($1.12 billion)offer from private equity groups trying to take control of the lender.
"Independent directors believe that the final offer undervalues Shawbrook and its prospects and therefore advise that shareholders take no action with regards to the final offer," Shawbrook said in a statement on Tuesday.
Marlin Bidco, the buyout vehicle set up by BC Partners and Pollen Street Partners, on Monday raised its offer for Shawbrook by just over 3 percent, as the bidders try to convince another 5 percent of shareholders to accept the deal.
Shawbrook said that it can grow "prudently" over the medium term and reach its return on equity targets without being taken over.
"This decision is ill-advised," analysts at RBC Europe wrote in a research note following the announcement, saying the bidders could now walk away from the deal and that other buyers were unlikely to emerge.
The latest offer represents a 27 percent premium to Shawbrook's closing share price on March 2, a day before the lender first received a bid from the private equity firms.
The offer will now remain open until June 19.
The private equity groups already hold 38.8 percent of Shawbrook shares and have so far received acceptances from investors holding another 6.6 percent of the stock, leaving them just under 5 percent short of the required 50 percent backing needed for the deal to go through.
The consortium first made its bid for Shawbrook in January offering 307 pence per share, upping it to 330 pence in March. However so far Shawbrook's directors have advised shareholders to reject the offer.
Founded in 2011, London-listed Shawbrook is one of several 'challenger' banks to emerge since the financial crisis to fill a gap in small business lending after larger banks slimmed down to focus on bolstering their capital to meet tougher regulatory requirements.
These challenger banks have been increasingly seen as ripe for takeovers in recent months, bankers who advise on mergers and acquisitions have said, as a prolonged period of low interest rates has squeezed earnings and the pound's fall has made them cheaper for foreign buyers.
Shares in Shawbrook were down 0.06 percent at 338.3 pence at 0713 GMT.
Reporting by Noor Zainab Hussain in Bengaluru, Editing by Lawrence White