With regard to the arrangement whereby certain shareholders can invest in the private equity vehicle after the takeover, funds – such as most of those in which FT Adviser readers are invested – will not be able to as they are not permitted by regulators to own unquoted assets.
Hanbury says this creates a “two tier” offer, and will incentivise some shareholders to accept the deal, but also some of the board members may be able to invest in the private equity vehicle and there is the potential for this to create a conflict of interest for the board members that recommended the deal.
A Hargreaves Lansdown representative declined to comment on the letter.
Prior to the latest bid being announced, another shareholder, Hugh Yarrow, who runs the Evenlode Income fund, said many of the issues that have hurt Hargreaves Lansdown’s performance in recent times have related to the health of stock markets and economies, and have not dented what he says is the quality of the Hargreaves Lansdown “franchise”.
Ben Williams is a director covering financial services businesses at Hannam and Co, an investment bank. He shares Hanbury's view of the merits or otherwise of the ability of some shareholders to roll their stake into the private equity vehicle.
But he is more sceptical on the valuation. He says that while the takeover price implies a cheaper valuation than the current valuation to which AJ Bell, a a peer company, trades, such a difference in valuation multiple may be justified by the fact that AJ Bell is growing at a faster pace than Hargreaves Lansdown.
Under the bonnet
The quality of the Hargreaves Lansdown businesses is something that has been on the mind of Mike Barrett, consulting director at the Lang Cat.
Data from Fundscape shows that at the end of March 2024, Hargreaves Lansdown had assets under administration of £132bn, comfortably ahead of its nearest rival in the direct-to-consumer space, AJ Bell, with £76bn.
Barrett says the landscape has changed: “Not that many years ago Hargreaves really did dominate this space, there was only it and Interactive Investor. There is more competition now of course.
"One of the things which became part of Hargreaves USP was the quality of the service; if you phone them you get an answer quickly. I do wonder if that will last under private equity ownership. Hargreaves – in terms of charges – for fund charges they are quite expensive, but for trading ETFs or investment trusts are quite cheap.
