Nubank has walked away from a potential £10 billion takeover of UK digital bank Monzo, reigniting hopes of a London IPO or minority private equity deal.
Shares in Latin America’s largest FinTech dropped sharply this week as investors were seemingly spooked by the weekend reports that the companies were in talks.
The news had come as a blow to London’s public markets, as the City has long courted Monzo, one of the UK’s flagship digital banks, as a potential listing candidate.
However the potential cash-and-shares takeover offer from Nubank – worth between £8-10bn – did not seem to have gone down well with investors in the Brazil-headquartered firm.
Analysts speculated that investors were worried about potential share dilution; the size of the deal, given that it is potentially more than double Monzo’s £4.5bn valuation in 2024 during a secondary share sale; that Nubank has historically grown organically rather than through acquisitions; and that Monzo has a smaller net income relative to the massive acquisition cost.
Nubank issued a statement to say it was “not pursuing a transaction” with Monzo but said it has a “great deal of respect” for the UK firm. Shares in Nubank, which is listed in New York, regained some of their value on the news.
Nubank said it remained focused on its strategic priorities of deepening its position in Brazil as well as scaling across Mexico, Colombia and the US.
Alongside the Nubank talks, Monzo is also said to be in discussions with private equity firms over the sale of a minority stake. A third, less likely option being considered is a further traditional equity fundraise.
Monzo reported a 39% jump in revenue to £1.7bn and 20% rise in pre-tax profits to £172.6m in its latest annual results.
Monzo has 16m customers, while Nubank has more than 139m.
Last year Monzo revealed plans to replace its CEO TS Anil with Diana Layfield, but a shareholder rebellion – led by venture capital firms Accel and Iconiq – saw him retained as vice chair amid demands for greater investor representation on its board.
Layfield began the role in February and has closed Monzo’s US operations, with a renewed focus on growth in Europe.