ADIA, CVC to buy out UK’s largest investment platform Hargreaves Lansdown in $6.9bn deal

The UK’s largest investment platform Hargreaves Lansdown on Friday agreed to a GBP5.4bn ($6.9bn) takeover by an international consortium, which is betting on grabbing market share in the competitive UK wealth market.

The deal is the second largest by value struck this year by a London-listed company and is the latest in a string of takeovers of British companies.

It has the backing of co-founders and top shareholders Peter Hargreaves and Stephen Lansdown, who founded the company in 1981 and listed it in London in 2007.

The consortium, consisting of Europe’s largest private equity firm CVC Capital Partners, Abu Dhabi’s sovereign wealth fund (ADIA) and Swedish private equity firm Nordic Capital, said the GBP11.40 per share cash offer was final.

The buyers said in a statement that a “substantial transformation” of the company was required, including investment in technology, to keep up with rivals after its growth had lagged some competitors.

“Whilst this is not a huge price, it looks to reflect the investment required,” Peel Hunt analysts said in a note.

Shares in FTSE 100-listed Hargreaves Lansdown rose 2 per cent to GBP11.02 pounds in early trade. As of Thursday’s close, they had gained about 10 per cent since the takeover approach was made public in May.

Co-founder Hargreaves plans to re-invest half of his 19.8 per cent stake in the private company and will bank the remaining GBP535m according to Reuters calculations. Lansdown stands to make GBP309m.

Foreign firms eye UK-listed companies

Britain’s wealth market has seen competition intensify in recent years, with international financial groups muscling into the market and increased focus on wealth management by some UK retail banks, insurers and asset managers.

US investment giant Vanguard, for example, has been expanding its UK Personal Investor platform, and US retail trading platform Robinhood launched in Britain in March.

Plans by the buyers to invest in Hargreaves Lansdown’s technology platform, along with any price cuts, could improve its competitive position, RBC analysts said in a note, while adding it was unclear how the investment would be funded.

Investors in Hargreaves Lansdown are being offered an alternative to the cash offer, with the option to rollover their shares into a stake in the private company.

Not all investors are able to hold shares of an unlisted company, potentially excluding some existing shareholders.

Hargreaves Lansdown, which had rejected a 985 pence per share proposal from the consortium in May, also reported annual adjusted pretax profit of GBP456m, beating analysts’ average estimate of GBP428m, according to LSEG data.

Net new business was down 13 per cent year-on-year at GBP4.2bn.

Hargreaves Lansdown was the largest UK-based investment platform in Britain by assets as of March, just behind the overall leader, Netherlands-based Aegon, according to Fundscape data.

Read: Hargreaves Lansdown extends deadline for CVC, ADIA consortium to firm up takeover bid