British investment firm Hargreaves Lansdown announced on Friday that it has agreed to a £5.4 billion ($6.9 billion) takeover offer from a consortium of investors led by private equity majors CVC Group and Nordic Capital, also including Abu Dhabi’s sovereign wealth fund.
The announcement ends months of uncertainty about the future of Britain’s biggest DIY investment platform.
The talks over the buyout had began earlier this year. In May, Hargreaves Lansdown had rejected an offer by the consortium as it felt it undervalued the firm and its prospects. The consortium then sweetened the deal to the current value.
Terms of the deal
Under the terms of the deal, Hargreaves Lansdown shareholders will receive 1,110 British pence per share and an additional dividend of 30 pence per share.
The deal includes an “alternative” option for shareholders who want to stay invested in the firm, by allowing them to roll over their stake into the unlisted company.
Peter Hargreaves, holding nearly 20% of the company, endorses the transaction and will divest half of his shares while retaining a portion under the new ownership. On the other hand, Stephen Lansdown has decided to sell his entire stake, which is close to 6%.
Alison Platt, chair of Hargreaves Lansdown, said,
The board believes that the cash offer represents an attractive opportunity for HL Shareholders . . . which may not be achievable until the execution of the strategy is delivered over the medium to longer term.
Pev Hooper from CVC Private Equity Group, Emil Anderson from Nordic Capital Advisors, and Hamad Shahwan Aldhaheri from the Abu Dhabi Investment Authority stated that substantial investment is needed for a technology-led transformation to enhance Hargreaves Lansdown’s proposition and resilience.
“We look forward to partnering with HL’s management to accelerate its transformation plan – including investment in technology infrastructure, digital channels, and service enhancement – all with client value, service, speed of innovation, and HL’s clear purpose at the core.”
Share price of the firm climbed more than 2% in early trading on Friday. The stock has surged by 54% year to date.
History and growth of Hargreaves Lansdown
Founded in 1981 by Peter Hargreaves and Stephen Lansdown from a spare bedroom with borrowed desks, Hargreaves Lansdown has grown substantially.
The firm now manages £1.55 billion for 1.8 million customers. Initially communicating through newsletters, the company has evolved to offer a high-tech online investment platform.
Listed on the London Stock Exchange since 2007, Hargreaves Lansdown has become a fixture in the FTSE 100 index.
The takeover group’s offer of £5.4 billion had been recommended to shareholders, though some industry experts, including Ben Yearsley of Fair Investing, believed the company is worth more due to its healthy cash flow, profits, and record assets under management.
HL employs about 2,400 people, most of whom work in its flagship offices on Bristol’s harbourside.
The UK’s leading digital wealth manager boasts a substantial loyal customer base and a robust digital platform.
By offering shareholders a stake in future profits, the consortium aims to align interests and secure approval.
PE firms up acquisition of UK companies
The acquisition of HL is the latest addition to a clutch of London-listed companies being snapped up by private equities or other acquirers who find them relatively cheap as compared to their peers in the US.
According to a report by the Times, PE firms significantly increased their buyouts of British companies, with 95 deals worth a cumulative £13.8 billion in the first half of 2024.
In Britain, notable buyouts over the past six months include Marlowe founder Alex Dacre’s acquisition of the listed software firm’s risk and compliance division in February, in a £430 million deal backed by private equity firm Inflexion.
Later this year, logistics company Evri may also change hands, with its current owner, Advent International, looking to sell it for about £2 billion.
Additionally, American buyout firm Thoma Bravo expects to complete its £4.3 billion acquisition of cybersecurity specialist Darktrace before year-end.
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