Hargreaves Lansdown still looks cheap and might yet be the subject of a bid battle believes US bank Jefferies.
The wealth platform received a new cash approach yesterday priced at 1,140p from a consortium of private equity companies CVC and Nordic Capital and the Abu Dhabi Investment Authority.
There is a deadline tomorrow of 5pm for a firm bid, but Jefferies believes other parties might yet get involved.
“We think 17x P/E is a very good deal for sector-leading scale, market share, operating margin, and brand recognition.
“We doubt the consortium is the only party looking and set an upside PT of £12.50, or c.18x earnings.”
What next?
According to Jefferies: “We expect the consortium to confirm their offer of £11.40, including a 30p final dividend (so £11.10 really) tomorrow.
“The Takeover Panel will likely grant the time extension, and the board will recommend the offer to shareholders.
“The largest private shareholders will probably roll over quite a lot of their holdings into the acquisition vehicle; most institutional investors will not be able to, but we think the 35% upper limit of shares to be rolled will probably be reached.
“There could be more offers: The offer price is cheap, in our view, and we doubt the board would have indicated its intention to recommend the offer were it not for the rollover clause.
“The new offer is c. 17x FY25e earnings, which compares with AJB and IHP on c. 20x.
“As we noted in our M&A piece back in February, HL/ was most likely to see an offer because, despite strategic and structural advantages, it is the cheapest of the immediate peer group. “None of that has changed, which means we think a counteroffer could materialise.”