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One of the UK’s best known “challenger” banks, Aldermore, has agreed to be bought by a South African financial firm.

FirstRand has offered 313p per share for Aldermore, a 22% premium to Friday’s closing share price, which values the bank at £1.1bn.

The offer will be put to shareholders, but the deal is being recommended by the bank’s board.

Aldermore said the deal would enable it to expand its range of products.

Competition

Aldermore was founded in 2009 with the aim of challenging the big four High Street banks, which have been criticised for their dominant market shares.

The bank has about 230,000 customers, including borrowers and savers.

It has no physical branches, but operates online and on the phone. It is best-known for lending to small and medium-sized businesses.

FirstRand said it was planning to expand the range of services offered by Aldermore to include car finance and insurance.

Aldermore’s chief executive, Phillip Monks, said the bank’s mission would remain unaltered.

“Our vision has always been to bring more competition to UK banking, and the support of the FirstRand Group will enable us to continue to do just that,” he said.

No date has yet been set for shareholders to approve the deal.