- The board of Monzo is deciding whether to sell the business to Nubank of Brazil or to raise further funds, with both alternatives valuing the bank at over £8 billion.
- If Nubank were to acquire Monzo, it would obtain a UK banking licence and gain access to Monzo’s 16 million customers, which would in turn help it to compete directly with Revolut in Europe.
- Nu Holdings, the company that owns Nubank, has a market value of $65.5 billion, which is more than seven times the value of Monzo as of October 2024.
For much of last year Morgan Stanley bankers were preparing for Monzo‘s public offering, but they are now working on an alternative strategy.
According to Sky News, Monzo has been approached regarding a possible agreement with Nu Holdings, the parent company of Nubank which is listed in New York. Initial discussions are taking place and this could turn into one of the largest fintech acquisitions in Europe.
Monzo is currently considering two possibilities, both of which assign a value to the company of more than £8 billion. The board could choose to sell the business to Nubank or else raise new capital in order to expand its operations in Europe.
The sale might reach a value between £8 billion and £10 billion. Nu Holdings, which has been listed on the New York Stock Exchange since late 2022, has a value of $65.5 billion.
Monzo has engaged Morgan Stanley and Qatalyst to handle the process. Any agreement would probably involve a combination of cash and shares.
A bank founded by a refugee meets a bank led by a former Google executive
The two companies have quite different origins. David Vélez, the founder and CEO of Nubank, was born in Medellín in 1982 and moved to Costa Rica at age nine to escape cartel violence.
Together with Cristina Junqueira and Edward Wible he set up Nubank in São Paulo in 2013 with the aim of disrupting Brazil’s banking industry by offering a credit card with no fees. Nubank currently provides its services in Brazil, Mexico and Colombia and had its initial public offering in December 2021.
Monzo’s case is unlike that of the others. The company began as a startup in London and, in 2015, raised £1 million within just 96 seconds via crowdfunding. It achieved its first full-year profit in 2024.
Founder Tom Blomfield had left several years before. Diana Layfield, who had earlier worked at Google and Standard Chartered, became CEO in February and has been concentrating on reducing the US business.
Whoever wins, Revolut has to respond
The acquisition of Monzo would enable Nubank to overcome a problem that it is unable to solve by itself. Although Nubank holds licences in the Americas, it has a limited presence in Europe and its principal European office is a technology and engineering centre in Berlin.
By acquiring Monzo, Nubank would obtain a UK banking licence as well as a large customer base, which would assist it in competing with Revolut in Europe. At the same time, Revolut has rapidly expanded into Latin and North America, where both Nubank and Monzo regard it as their main competitor.
A public listing would have been a setback for London. The authorities had expected Monzo to go public to boost the stock market. In the year up to March, Monzo earned a pretax profit of £87.3 million on revenue of £1.7 billion.
No agreement has yet been reached and it is common for deals of this scale to collapse. The fact that Monzo is contemplating a sale so soon after its bankers recommended an IPO demonstrates the shift in both founder aspirations and public interest in consumer fintech.
However, if Vélez obtains a UK licence, the greater issue will be whether Nubank will limit itself to purchasing just one bank.
