Hargreaves Lansdown Agrees to £5.4bn Takeover by CVC Consortium

Hargreaves Lansdown PLC (LSE:HL.), a leading wealth-management platform, has officially approved a takeover bid valued at £5.4 billion from a private equity consortium that includes CVC Capital Partners, Nordic Capital, and Platinum Ivy. This agreement values the company at 1,140p per share, representing a 54% premium over its share price on April 11, the date when the bidding consortium initially approached the board of Hargreaves Lansdown. The deal has sparked certain concerns among shareholders about a perceived "two-tier" structure of the offer, which seems to favor the company’s co-founders and major stakeholders more significantly.

The co-founders of Hargreaves Lansdown, Stephen Lansdown and Peter Hargreaves, are poised to receive an £800 million windfall from the acquisition, a move that reflects their monumental journey from starting the business in a Bristol spare bedroom to becoming a pivotal player in the UK’s investment services sector. Peter Hargreaves plans to sell half of his shares to the buyers from Europe and the Middle East, while Stephen Lansdown intends to completely sell off his stake.

In parallel to the takeover announcement, Hargreaves Lansdown also disclosed its full-year financial results, which surpassed expectations. The company reported a total revenue increase of 4% to £765 million and a slight 2% decrease in profit before tax to £396 million. Its adjusted earnings per share stood at 71p with an underlying profit before tax of £456 million, exceeding the predictions by city analysts. A significant factor contributing to the company's financial performance was the persistently high net interest margins, particularly from customer cash, which albeit lower in total net interest income year-on-year, benefited from an improved margin.

The final dividend announced was 43.2p per share, up 4% from the previous year, including a 30p final payout, reflecting the company's continued profitability and operational success. Despite substantial financial achievements, the news of the takeover has somewhat overshadowed these solid results, with expectations that the deal will proceed smoothly considering the board's recommendation and the lack of substantial shareholder resistance.

As part of the takeover offer, the consortium has proposed an ‘alternative offer’ allowing shareholders preferring to maintain an interest in Hargreaves Lansdown’s future the option to do so under a private company structure, although specific details of this proposal have been a point of debate among stakeholders.

In summary, the takeover of Hargreaves Lansdown by the CVC-led consortium represents a significant shift in ownership for one of the UK's leading investment platforms, coinciding with strong financial performance and the promise of a lucrative exit for its founders. The arrangement highlights the increasing private equity interest in successful wealth management platforms amid a changing financial services landscape.