9th Aug 2024 12:54
(Alliance News) - Analysts expect the bid for Hargreaves Lansdown PLC will succeed and think the price paid may prove a steal for the CVC-led consortium.
Hargreaves Lansdown, the Bristol-based wealth management platform on Friday accepted a GBP5.44 billion offer from a consortium of private equity buyers.
The consortium, made up of CVC Private Equity Funds, Nordic Capital XI Delta and Platinum Ivy B 2018 RSC Ltd, a wholly owned subsidiary of the Abu Dhabi Investment Authority, have agreed to pay 1,140 pence per share cash for each Hargreaves Lansdown share.
This includes a dividend of 30p per Hargreaves Lansdown share in respect of the financial year to June 30 which was declared on Friday.
Hargreaves Lansdown originally received a takeover proposal from the consortium in June.
The bid values Hargreaves Lansdown at GBP5.44 billion on a fully diluted basis. Shares in Hargreaves Lansdown rose 2.1% to 1,099.85p in London on Friday morning, giving it a market capitalisation of GBP5.22 billion.
The consortium said it had received backing from shareholders representing just over 25% of Hargreaves Lansdown shares. This includes the support of founders Peter Hargreaves and Stephen Lansdown.
Hargreaves intends to keep 50% of his around 20% holding. Lansdown will sell his entire 5.7% stake.
Shore Capital analyst Vivek Raja expects the deal to go through as the Hargreaves Lansdown board has recommended it and there doesn't appear to be sufficient shareholder resistance to the proposal.
Raja believes the deal is "in our view a great price for the buyer".
Raja explained the consortium's indicative offer for the business would value Hargreaves Lansdown on around 16x trough earnings and enterprise value over assets under management of around 3%.
These metrics compare to the firm's 10-year average valuation of around 28x and 4.5% to 5% respectively.
These are not a "fair reflection in our view of HL's high-quality earnings and cash flow visibility, or its exposure to long-term structural growth, expressed through a FTSE100 business with a dominant position in the D2C platforms market," Raja added.
"Assuming HL is imminently acquired, when/if this asset returns to public markets in say five years, we think it could price at a multiple of its take-out," Raja remarked.
Peel Hunt thinks the consideration is not a "huge price" but indicative of the investment required.
"Given the time to reach a recommendation, we believe it seems unlikely that other interest will now emerge."
Jefferies agrees. It expects the offer to succeed but thinks although the offer is a 54% premium to the pre-offer share price, there is greater value in HL in the medium term.
By Jeremy Cutler, Alliance News reporter
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