Mark Kleinman: Hargreaves Lansdown deal poses conundrum for retail punters
Mark Kleinman is Sky News’ City Editor and the man who gets the Square Mile talking with his weekly Morning Wire column. Today, he takes a look at the Hargreaves Lansdown takeover deal, the auction of The Daily Telegraph and efforts to boost London’s capital markets
Hargreaves Lansdown deal poses conundrum for retail punters
What would Hargreaves Lansdown say about this deal? Were it able to opine independently, the retail investment platform might not be effusive about the price at which it is being taken over by a consortium of private investors.
At £11.40-a-share, its eponymous founders have been left ruing the six-year reign of Chris Hill, Hargreaves Lansdown’s former chief executive. The company’s valuation had slumped by close to three-quarters by the time the offer from the CVC Capital Partners-led bid emerged in May, and is being taken out at less than half the £24-a-share at which it traded back in 2019.
Peter Hargreaves, one half of the founding duo, is personally leaving a lot of money on the table – £500m, to be precise, or half of his 19.8pc stake. People close to him say he is “extremely disappointed” at the takeout price.
Rather than him being persuaded to keep his remaining interest in order to back the consortium’s bid, though, I understand from one of the bidder’s advisers that in fact it was the other way around: Hargreaves had to keep some skin in the game in order to persuade CVC and its partners to proceed with the offer. That’s logical given that Hargreaves is both the company’s biggest shareholder and client.
Alison Platt, Hargreaves Lansdown’s chairman, is said to have told leading shareholders in recent weeks that such is the state of the company, they should not expect to see the offer price for up to seven years if it remains independent.
With that warning in mind, it’s unsurprising that Platt and her colleagues have recommended the offer.
Either way, the option for other shareholders to roll over their stakes into the bid vehicle will look tempting to those who don’t need the cash given Hargreaves’ lead.
Clever marketing, a better digital experience (Hargreaves Lansdown’s current app is clunky) and more competitive pricing could allow it to wrest back an initiative seized in recent years by rivals such as AJ Bell.
That overhaul may be better executed away from the public markets, and remains fraught with risk, but the upside for shareholders who keep the faith could be considerable.
Digital Doug or Flintstone?
Just call him Digital Doug. For Sir Douglas Flint, the chair of struggling fund manager Abrdn and early-stage science backer IP Group, another big assignment has been dominating his in-tray.
As chair of the government-appointed Digitisation Taskforce, Flint was tasked with modernising an arcane backwater of capital markets infrastructure: share registration and ownership.
In recent weeks, key City stakeholders have grown increasingly concerned that Flint’s final report later this year might backslide on dragging the UK into the digital age.
A letter to Flint from City trade associations, which I’ve seen, highlights the scale of this anxiety.
“A transition to a unified and rationalised system of share ownership…could remove duplicative and antiquated practices, and reposition the UK at the forefront of modern, efficient capital markets, enhancing our ability to attract investment and support economic growth,” the letter said.
Failure to deliver full dematerialisation would, it added, “have significant consequences for the future legacy of the UK’s capital markets” and risk Britain becoming “a less attractive investment destination, leading to capital flight and diminished market liquidity”.
The drive towards modernisation is not without cost, risk or complexity – otherwise ministers would never have needed to tap Flint’s brainpower in the first place.
Nevertheless, the City’s need for reforms to be bold and far-reaching has never been greater. The international competitiveness of the UK’s capital markets is understandably being questioned, as listings which would naturally have gravitated to the UK have been drawn towards rival stock markets in Europe and the US.
His final report will determine whether he deserves the moniker ‘digital Doug’, or whether the more antediluvian nickname of Flintstone would be more apt.
For Saatchi, bidding isn’t working
Bidding isn’t working – at least not for Lord Saatchi, whose eponymous advertising agency conjured the memorable ‘Labour isn’t working’ campaign for Margaret Thatcher.
Now, the Tory peer has been cast out of the auction of The Daily Telegraph having offered only £350m for the newspaper and its stablemate, The Spectator.
People close to the process say the bid was the lowest of those received in the first round, although others, including the Belgian publisher Mediahuis, have also been eliminated.
That leaves a degree of mystery surrounding the remaining parties, given that the Daily Mail proprietor, Lord Rothermere, has already publicly withdrawn from the process, while Sir Paul Marshall appears to have switched his attention to acquiring The Spectator.
David Montgomery, the newspaper industry veteran, remains in contention, although he faces the considerable obstacle of having to raise most of the offer price from public shareholders.
Former chancellor Nadhim Zahawi has assembled a £600m offer that is now “fully financed”, according to one person close to it.
That leaves at two other serious bids in the frame, but with the likes of Axel Springer and Rupert Murdoch’s News UK not in the mix, the other contenders are said to be investment groups rather than strategic bidders. The plot thickens.