The Aldermore board has backed a £1.1bn takeover offer from South African bank FirstRand.
If the deal goes through then FirstRand would roll its UK retail and SME operations into Aldermore.
Current Aldermore chief executive Phillip Monks would lead the newly-merged firms.
The offer values Aldermore at 1.8x its net tangible book value of £607.1m as of 30 September.
FirstRand wants to buy Aldermore to give it diversification.
The deal will also integrate FirstRand’s vehicle finance brand MotoNovo into Aldermore.
FirstRand says this will open cross-selling opportunities.
Each Aldermore shareholder would get 313p a share under the offer terms.
Aldermore shareholders will vote on the deal at an unspecified future date, and 75 per cent must agree to the takeover.
Monks says: “Through its own portfolio of leading financial services franchises, the FirstRand Group has demonstrated its ability to successfully integrate entrepreneurial businesses and we believe there is a strong strategic and cultural fit for customers, colleagues and wider stakeholders.”
FirstRand chief executive Johan Burger says: “We are very pleased that the board of Aldermore, one of the UK’s leading specialist lenders, will be recommending our offer.
“The team at Aldermore have built a fantastic bank in a short period of time and we look forward to working closely with them to identify further growth opportunities.”
The firms first announced they were in sales talks in mid-October.