Hargreaves Shares Bounce as Private Equity Firms Thrash Out Deal

Morningstar

Shares in FTSE 100 broker and fund supermarket Hargreaves Lansdown (HL) have bounced on news its board will accept a takeover bid from a group of private equity firms.

Yesterday, Hargreaves said US private equity giant CVC Capital, Denmark’s Nordic Capital, and a branch of the Abu Dhabi Investment Authority had made a consortium cash offer of £11.40 per share, valuing the Bristol business at £5.4 billion.

Over the last five days, Hargreaves’ share price is up 5.55% to £11.57, a sign investors are responding positively to the private equity interest.

The latest bid is the fourth such offer submitted to the investment firm. It had previously rejected three approaches on valuation grounds.

The companies now have until 1700 on July 19 to close their deal.

What Will Happen to Hargreaves if it is Sold?

If Hargreaves Lansdown is sold to a private equity business, or businesses, it will become the latest FTSE 100 firm to de-list from the index in favour of private ownership.

As a result, its shares will no longer be available to the public for purchase and trading.

If that occurs, the story would not just illustrate private equity interest in UK PLC, but also underline the malaise gripping the UK’s capital markets, which have struggled to display the compelling valuations on offer in the US and certain emerging markets.

Fund managers, investors, and businesses alike have complained about UK company valuations. This has led some firms to relist in more favourable markets, or simply to ignore the UK as a flotation location altogether.

In September last year, Cambridge-based chip designer Arm Holdings rejected London as a listing opportunity in favour of a place on the the Nasdaq. It shares have since prospered.

Betting firm Flutter also ditched its primary London listing in favour of New York, while the cyber security giant Darktrace, which floated in London 2021, accepted a US private equity bid in April this year.

Christian Kent, managing director of Houlihan Lokey, says the Hargreaves deal underscores the so-called “valuation disconnect” for wealth managers working with both public and private markets.

“With over 25 private equity-backed wealth management firms in the UK, this move isn’t surprising,” he told Morningstar.

“Over time, we expect to see further consolidation among these firms. With robust private equity backing, HL could emerge as a pivotal player in this consolidation through M&A activities.”

Kent now expects that, under private equity ownership,

The full article is available here. This article was published at Morningstar Private Assets.