Hargreaves Lansdown ($HL), a leading British investment platform operator, witnessed an impressive performance in its share prices on Friday, driven by the company’s announcement of robust earnings and the successful conclusion of extensive takeover negotiations with a private equity consortium. This marks a significant turning point for the firm, which has undergone a tumultuous journey in its pursuit of a strategic acquisition.
The board of Hargreaves Lansdown gave the green light to a lucrative acquisition offer of 5.44 billion pounds in cash from Harp Bidco, an entity recently established by a collaboration of renowned investors including CVC Private Equity Funds, Nordic Capital XI Delta, SCSp, and the Abu Dhabi Investment Authority's Platinum Ivy B 2018.
These negotiations culminated in an offer of 11.40 pounds per share, representing an impressive 54.1% premium over the stock's closing price recorded on April 11, the last business day prior to the consortium's approach. Despite the initial offer being declined in late May, persistent discussions took place throughout mid-June, leading to multiple extensions of the UK-mandated put-up-or-shut-up deadline to facilitate further negotiations.
'It has been an eventful first 12 months, not least with the approach from the consortium which has today resulted in a firm and final offer for HL, with the Independent Board of HL intending to unanimously recommend the cash offer to shareholders,' remarked Dan Olley, Chief Executive Officer of Hargreaves Lansdown.
Should the proposed acquisition receive approval and stipulated conditions are satisfied, the deal is slated for completion in early 2025. This strategic move will also culminate in Hargreaves' delisting from the London Stock Exchange, bringing a close to nearly two decades of its public listing status, which began in May 2007.
The acquisition proposal features a contentious rollover security structure allowing HL shareholders to retain ownership of up to 35% of the reorganized company going forward. Insights from RBC Capital Markets analysts indicate that the Bidco consortium is planning to invest in the technology platform with the intention of accelerating Hargreaves' transformation and modernization.
'However, we are yet to establish how this investment will be funded. Material investment along with price reductions could enhance the competitive position of HL,' they noted in their analysis. In addition to the acquisition news, Hargreaves Lansdown disclosed a 4% year-over-year increase in underlying profit before tax, reaching 456 million pounds for the twelve months ending June 30.
This figure is 2% higher than market consensus. Nevertheless, profit attributable to the parent company's owners decreased to 293.2 million pounds from 323.8 million pounds during the same period, while revenue has seen an uplift of 4%, totaling 764.9 million pounds. As the trading day progressed, Hargreaves' shares exhibited a rise of more than 2%, reflecting positive market sentiment towards the company’s future prospects amidst these developments..