Steve L and Hargreaves Lansdown turn down a 4.67 billion offer for their company -
Hargreaves Lansdown (HL.) has turned down a £4.7bn approach from a private equity consortium as bidders continue to take advantage of depressed UK stock market valuations.
that included CVC Capital Partners (NL: CVC), plus a subsidiary of the Abu Dhabi sovereign wealth fund.
Hargreaves management said in an early morning trading update that the projected bid “substantially undervalues” the business. It was first approached by CVC on 26 April, which coincides with a sustained recovery in the share price.
Nevertheless, the market bid up the shares by 15 per cent on the news, in expectation this will was the opening round in a price negotiation; the shares are currently about 12 per cent above CVC’s opening offer. CVC was recently listed on the Amsterdam Euronext exchange and raised €2bn (£1.7bn) in an IPO.
CVC's opening offer is close to the discounted cash flow target price of 1,220p (or a price-earnings rating of 17) ascribed to the shares by analysts at broker Peel Hunt. However, Peel Hunt noted: “Our view is that an approach at these levels is particularly optimistic." It is also true that the share price rise will have been influenced by a considerable amount of short covering given that hedge funds have regularly targeted the company over the past 12 months.
Whether CVC is successful depends on the company’s founders, who own 26 per cent of the shares; Peter Hargreaves alone controls 20 per cent. However, one factor in CVC’s favour is that Mr Hargreaves has been highly critical of the current management’s strategy, particularly its approach to controlling costs, which in his view are far too high.
Platforms are on an upward curve and it seems likely that CVC will have to up its offer considerably. At the start of the year, the share platforms had been suffering from valuations that were at multi-year lows – in HL’s case, the lowest price-to-earnings level since 2009.
However, a combination of higher interest rates generating a stream of income from customers’ uninvested cash, plus signs that investors are returning to equities and funds has helped the sector considerably since the start of the year. AJ Bell (AJB), which announced its interim results on the same day as the bid news, reported pre-tax profits had risen by 46 per cent. Its shares saw a big sympathy rally as investors cast around for ways to play the HL bid speculation without getting directly involved.
Hargreaves Lansdown (HL.) has turned down a £4.7bn approach from a private equity consortium as bidders continue to take advantage of depressed UK stock market valuations.
that included CVC Capital Partners (NL: CVC), plus a subsidiary of the Abu Dhabi sovereign wealth fund.
Hargreaves management said in an early morning trading update that the projected bid “substantially undervalues” the business. It was first approached by CVC on 26 April, which coincides with a sustained recovery in the share price.
Nevertheless, the market bid up the shares by 15 per cent on the news, in expectation this will was the opening round in a price negotiation; the shares are currently about 12 per cent above CVC’s opening offer. CVC was recently listed on the Amsterdam Euronext exchange and raised €2bn (£1.7bn) in an IPO.
CVC's opening offer is close to the discounted cash flow target price of 1,220p (or a price-earnings rating of 17) ascribed to the shares by analysts at broker Peel Hunt. However, Peel Hunt noted: “Our view is that an approach at these levels is particularly optimistic." It is also true that the share price rise will have been influenced by a considerable amount of short covering given that hedge funds have regularly targeted the company over the past 12 months.
Whether CVC is successful depends on the company’s founders, who own 26 per cent of the shares; Peter Hargreaves alone controls 20 per cent. However, one factor in CVC’s favour is that Mr Hargreaves has been highly critical of the current management’s strategy, particularly its approach to controlling costs, which in his view are far too high.
Platforms are on an upward curve and it seems likely that CVC will have to up its offer considerably. At the start of the year, the share platforms had been suffering from valuations that were at multi-year lows – in HL’s case, the lowest price-to-earnings level since 2009.
However, a combination of higher interest rates generating a stream of income from customers’ uninvested cash, plus signs that investors are returning to equities and funds has helped the sector considerably since the start of the year. AJ Bell (AJB), which announced its interim results on the same day as the bid news, reported pre-tax profits had risen by 46 per cent. Its shares saw a big sympathy rally as investors cast around for ways to play the HL bid speculation without getting directly involved.
