Hargreaves Lansdown shares surge on rejection of £5bn private equity takeover bid

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Hargreaves Lansdown shares surged by more than 15 per cent on Thursday after the UK investment site rejected a £4.67bn takeover approach from a group of private equity firms, including CVC Capital Partners and a subsidiary of Abu Dhabi’s sovereign wealth fund.

The board of Hargreaves Lansdown said on Wednesday evening that it had “unanimously rejected” the surprise proposal of 985p per share, noting that it “substantially undervalues” the business and its prospects.

The company’s shares increased by 9 per cent, at £10.69, in afternoon trading on Thursday, taking it up 60 per cent in the year to date.

The bidding consortium, which also includes private equity firms Nordic Capital, and Platinum Ivy, a wholly-owned subsidiary of the Abu Dhabi Investment Authority, confirmed that it was “considering a possible offer”, having made its most recent approach at the end of April.

Peter Hargreaves, the largest shareholder in the investment company, told the Financial Times that the approach was an “interesting development” but declined to comment further.

The bid for the FTSE 250 company is the latest sign of private equity’s interest in the UK wealth management sector. Analysts said the approach also highlighted that listed companies in the industry were trading at a discount — offering an enticing opportunity for private equity firms to swoop.

Ben Bathurst, an analyst at RBC Capital Markets, said there was “deep-lying value” in Hargreaves Lansdown, which had “a first-rate” customer base. He added that the offer could have “a positive read-across” for its competitors, such as Quilter and St James’s Place, which are also trading at discounts.

Shares in Hargreaves Lansdown rose nearly 5 per cent on Wednesday amid speculation of an offer. The board, however, said that it was “focused on executing its strategy” ahead of its full-year earnings results in August, adding that “shareholders are advised to take no action”.

The consortium’s approach at the end of April represented a 30 per cent premium on Hargreaves Lansdown’s closing price of 755p. The group of investors must decide whether it will make a firm offer by June 19.

The Bristol-based company, known for its execution-only investment site, oversees £150bn in customer assets and has 1.8mn customers. The group reported £1.6bn of net customer inflows over the first three months of the year, the same amount recorded a year ago.

The business was founded four decades ago by billionaire Hargreaves and Stephen Lansdown, both of whom are top shareholders.

But the company has come under pressure recently. It was ejected from the FTSE 100 at the end of 2023, although it could soon rejoin the blue-chip index following a jump in its share price.

The business recently appointed Alison Platt as chair, who took on the role in February to replace Deanna Oppenheimer. Dan Olley, who joined as a non-executive director June 2019, was appointed as chief executive in August last year.

The company also came under fire from Hargreaves over its rising costs and plans to roll out an automated advice service.

He told the FT that the board had “indulged in completely unnecessary irrelevant programmes”, adding “it’s hardly surprising the shares have collapsed”.