In a significant development in the UK’s financial sector, Hargreaves Lansdown, the country’s largest DIY investment platform, has agreed to a £5.4 billion takeover by a consortium of private equity firms. The deal, which is expected to end months of uncertainty surrounding the company’s future, will see the FTSE 100-listed business taken private by CVC Capital Partners, Nordic Capital, and the buyout arm of the Abu Dhabi Investment Authority.
The board of Hargreaves Lansdown has announced its intention to recommend the £11.40-a-share cash offer to its shareholders. As part of the deal, Peter Hargreaves, the billionaire co-founder who owns nearly a fifth of the group, will remain partially invested by rolling over half of his 19.8% stake while cashing out the remainder for approximately £535 million. Stephen Lansdown, the other co-founder, is also backing the consortium’s offer and will take cash for his entire 5.7% stake, valued at £309 million.
With the support of investors representing 25.5% of Hargreaves Lansdown’s equity, the likelihood of the takeover going through is high. However, some analysts have criticised the offer, arguing that it undervalues the group. Jefferies’ analysts noted that although the offer represents a 54% premium to the pre-offer share price, they believe there is greater value in Hargreaves Lansdown in the medium term. Investec analysts also cautioned that the takeover “does not represent a ‘knock-out’ price” and suggested that there is still an opportunity for an alternative bidder to emerge.
The fate of the company has been uncertain since May when it revealed that it had been approached about a takeover by the consortium in the previous month. Despite spurning three initial bids, the board indicated in June that it was minded to back a fourth proposal from the suitors, valuing the company at £11.40 a share.
The bid also included an alternative option for shareholders to remain invested in the wealth manager, up to a limit of 35% of the group’s equity. Some shareholders have criticised the bid, arguing that the roll-over option creates a “two-tier” deal.
While this alternative is open to all shareholders, many City funds may find it difficult to hold paper in unlisted companies and will be forced to accept the consortium’s cash offer, even if they had wanted to remain invested in the group after it was taken private.
The deal was confirmed alongside Hargreaves Lansdown’s full-year results, which showed a slight dip in pre-tax profits to £396.3 million from £402.7 million in 2023. Despite this, the results were better than City analysts had expected.
Following the announcement, Hargreaves Lansdown shares rose 2.3%, or 24½p, to £11.02.
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