- Board backs 1,140p-a-share bid
- Shareholders have the option to roll over holdings
A stock market journey that started in 2007 looks set to end for middle England’s favourite online share and funds platform, Hargreaves Landown (HL.), after the board accepted a £5.4bn, or 1,140p a share, offer from a private equity consortium led by CVC, Nordic Capital and Platinum Ivy, backed by the Abu Dhabi Investment Authority, after a prolonged round of discussions and negotiations that saw the takeover panel deadline extended.
Shareholders will have the chance to vote on the deal at the general meeting, currently scheduled for 22 October. The shares were up 2 per cent in early trading as the market moved towards the offer price. As of Friday morning, the board had irrevocable undertakings from shareholders representing 25.5 per cent of the equity to vote for the deal.
Company founders Peter Hargreaves and Stephen Lansdown remain significant shareholders, with 19.8 per cent and 5.7 per cent holdings, respectively.
Peel Hunt analyst Stuart Duncan commented: “At the offer price, the consideration equates to 16.6 times consensus FY25 [earnings], or 3.5 per cent of [assets under management] – in our view, whilst this is not a huge price, it looks to reflect the investment required. Given the time to reach a recommendation, in our view it seems unlikely that other interest will now emerge”.
The deal allows existing investors to roll over their holdings into the private company, up to 35 per cent of the total share issue, although these will be illiquid, non-transferable shares. The consortium will also cover the £100mn in buyout costs by issuing new private shares, diluting investors who hold on to part of their stake.
The interesting part will be how private equity decides to shape the business. Though now rendered irrelevant as far investors are concerned, exponentially rising costs has been a frequent source of discontent between the board and its largest shareholders, as the company tried to modernise its offering in the face of stiff competition from the likes of AJ Bell (AJB) and the Abrdn (ABDN)-owned Interactive Investor. The consortium said “a substantial transformation” was required at Hargreaves Lansdown to help promote “savings and investing in society”.
“Further investment by [the consortium] in the technology platform is expected to improve operational resilience, enhance capacity in systems, and deliver significant scalability and operating leverage in its cost base going forward,” the buyer added.
In the full-year results, underlying operating costs rose by 8 per cent to £338mn, with salaries and personnel costs among the biggest risers. Hacking away at the cost base and introducing technology to simplify its processes will be a number one priority for the consortium. It seems to have been a commitment that the board decided that the company could not achieve on its own as a listed entity.