London-based Metro Bank has struck a deal to buy peer-to-peer lender RateSetter for £2.5 million ($3.27 million) upfront. Metro will make additional payments to shareholders if RateSetter reaches certain benchmarks, according to a news release.
Those are: £500,000 will be paid one year after the deal closes and £9 million after three years, if RateSetter, also based in London, meets the criteria, for a total potential deal cost of about $15.6 million. Metro Bank will operate RateSetter as an independent entity and make loans under both its and Metro Bank brands.
The deal is subject to approval from the U.K.’s Financial Conduct Authority and to having RateSetter shareholders owning at least 60 percent of the company’s shares signing off on the deal.
“The board of directors of RateSetter unanimously recommends the transaction and that shareholders of RateSetter accede to the relevant transaction documents,” the release said. The two companies said that shareholders holding 45.7 percent of RateSetter’s shares have already signed off on the transaction.
Metro Bank’s acquisition does not include RateSetter Australia, which is being retained by shareholders.
The two companies “share a focus on delivering something better for the customer,” RateSetter CEO Rhydian Lewis said in the release, adding there was a “strategic logic” to marrying RateSetter’s technology platform with Metro Bank's “strong deposit base.”
Metro Bank CEO Daniel Frumkin said the deal gives his company a strong base for addressing its “strategic ambition” to expand into unsecured lending.
Frumkin was brought in as CEO to turn around Metro Bank last year, after the company was ensnared in accounting problems. The bank had been set to rapidly expand its branches and beef up its mortgage lending. However, Metro was forced to curtail its efforts when it was revealed that it was miscategorizing some loans when figuring capital requirements.
RateSetter, founded in 2010, said it is “the U.K.'s most popular peer-to-peer lender with over 750,000 people having invested or borrowed through the platform.”