The Hargreaves Lansdown share price jumps as £5.4bn takeover is agreed

The Hargreaves Lansdown share price has spiked in morning trading following the announcement of a £5.4bn takeover by private equity.

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As I write, the Hargreaves Lansdown (LSE: HL.) share price is up 2.2% in morning (9 August) trading following the news it has agreed to be taken over by a private equity consortium. The group consists of CVC, Nordic Capital, and ADIA, Abu Dhabi’s sovereign wealth fund.

The stock’s been in fine form this year, rising 54.5% year to date and 37.3% over the last six months. So after hearing the news, some investors may be wondering if Hargreaves is a stock to consider buying. That’s what I’m here to answer.

Details of the deal

Before I do, let’s take a closer look at the details of the deal. As mentioned, the takeover values the firm at £5.4bn. That works out to a price of 1,140p per share, including 30 pence for its final dividend of 2024.

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The price represents a 54.1% premium to the stock’s close on 11 April. That was the last day before the group’s initial approach to takeover the company.

The business is unanimously recommending shareholders support the takeover offer. In a release, Dan Olley, CEO of Hargreaves, said the business had “been reassured during process that the consortium are aligned with our mission”.

The consortium also released a statement, saying how Hargreaves “requires substantial investment in an extensive technology-led transformation to improve HL’s proposition and resilience, and to drive the next phase of HL’s growth and development”.

The firm was co-founded back in 1981 by Peter Hargreaves and Stephen Lansdown. Both have agreed to vote for the deal.

Half-year update

Alongside the takeover announcement, we also got its half-year results. The update had both positive and negative aspects.

Overall, Hargreaves saw net new business of £4.2bn, down from £4.8bn a year earlier. Despite that, it posted revenue of £764.9m, up 4% from the £735.1m recorded in the first half of 2023.

As such, assets under management rose 16% to £155.4bn. The business said this was “driven by net new business and positive market movement”.  

The firm now has just over 1.8m active clients and saw a 78,000 increase year over year. That said, profit before tax did fall 2% to £396.3m.

What next?

But where does that leave us potential investors? Well, its share price performance lately has been impressive. But driving that has been takeover talks. And while Hargreaves has many components I look for when investing in a business, such as strong brand recognition and a large customer base, I won’t be buying the stock today.

That’s because its share price has jumped to over 1,100p, just below the agreed takeover price.

As such, I’ll be steering well clear of picking up Hargreaves Lansdown shares any time soon. There’s little point in me buying the stock at the current price.

Regardless, I’ll keep hunting the FTSE 100 for my next bargain. I’m keen to gain more exposure to the financial services sector and see plenty of potential buying opportunities out there.

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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