Hargreaves Lansdown Agrees to $6.9 Billion Takeover by CVC Consortium
Background of the Deal
British investment platform Hargreaves Lansdown, a major player in the U.K. stockbroking scene, has announced its decision to accept a takeover offer from a consortium of investors. This group includes the well-known CVC Group, the Abu Dhabi sovereign wealth fund, and Nordic Capital. The offer is valued at £5.4 billion, equivalent to $6.9 billion, providing shareholders with 1,110 British pence per share, along with an additional dividend of 30 pence per share. The announcement of this deal has led to a 2.2% rise in Hargreaves Lansdown's shares.
Previous Offers and Market Reaction
This takeover agreement follows a previously rejected offer in May from the same consortium, which was valued at £4.7 billion or 985 pence per share. At that time, Hargreaves Lansdown considered the offer to significantly undervalue the company's worth and future potential. The current offer represents a 54% premium over the company's share price of 740 pence on April 11, the day before the initial bid.
Company Performance and Strategic Shifts
Despite facing challenges such as regulatory changes and increased competition, Hargreaves Lansdown has been actively working on a strategic overhaul. In September 2023, the company published a plan focusing on enhancing client services, boosting innovation, and implementing cost-saving measures. For the fiscal year ending June, the company reported a 4% rise in underlying profit before tax, reaching £456 million. Revenue also saw a 4% increase, totaling £764.9 million. However, the net new business inflows fell by 13% to £4.2 billion.
Analyst and Board Opinions
Analysts from Jefferies have expressed their belief that the takeover bid will likely proceed. According to them, even though the offer is at a premium, there is potential for further value growth in the medium term. The board, along with major shareholders such as the founders, supports the consortium's offer. Hargreaves Lansdown's Chair, Alison Platt, described the proposal as "an attractive opportunity for HL Shareholders."
Future Prospects and Investor Plans
The consortium, comprising CVC Group, Nordic Capital, and the Abu Dhabi Investment Authority, emphasizes the necessity for substantial investment in Hargreaves Lansdown to propel it into a technology-driven transformation. Their goal is to enhance HL's service proposition and resilience, driving future growth. They anticipate investments in technology infrastructure, digital channels, and service improvements, focusing on client value and the pace of innovation.
This takeover signals a significant shift for Hargreaves Lansdown, preparing the company for its next phase of development and growth in a competitive financial landscape.
