In major news on UK stocks, Hargreaves Lansdown PLC (GB:HL) shares soared after the company rejected a takeover bid worth £4.67 billion. The offer came as a surprise for the company from a group of private equity (PE) firms, which included Luxembourg-based CVC Capital Partners, a subsidiary of Abu Dhabi Investment Authority, among others.
Shareholders responded favorably to the rejection, with Hargreaves Lansdown shares trading up 9% as of writing. Year-to-date, HL stock has surged by nearly 50%.
Hargreaves Lansdown is a financial services company that offers investment and saving solutions to private investors.
Hargreaves Rejects an Undervalued Offer
According to its statement, Hargreaves Lansdown noted that this marks the third approach from the consortium, with the recent offer price set at 985p per share. However, the company emphasized that the board unanimously turned down the proposal, citing its belief that the offer considerably undervalues Hargreaves Lansdown and its future potential.
The consortium has time until June 19 to either declare a firm intention to make an offer or announce their decision otherwise. The consortium is considering making an offer while also indicating the possibility that no proposal may materialize.
Analysts’ Opinions
Analyst Ben Bathurst from RBC Capital Markets stated that Hargreaves Lansdown holds significant intrinsic value, boasting a top-tier customer base. As per its Q3 trading update, the company added 34,000 new customers, resulting in total active clients of 1.9 million. This marked an impressive year-over-year growth rate of 48% in new customer registrations.
Additionally, Bathurst suggested that the offer could have positive implications for Hargreaves’ competitors, like Quilter (GB:QLT) and St. James’s Place (GB:STJ), which are also trading at low valuations.
Bathurst has a Hold rating on HL stock, predicting a downside of 20.5%.
Meanwhile, Shore Capital analyst Vivek Raja also hailed the company’s client base, which covers around 40% of the UK’s D2C platform investing market. Raja believes the company has solid prospects to grow its customer base, driven by the rising demand to save and invest through such platforms.
However, he also highlighted the company’s low valuation, which was reflected in the offer price.
Is Hargreaves Lansdown a Good Buy?
HL stock has been rated as a Moderate Buy based on three Buys, one Hold, and one Sell recommendation. The Hargreaves Lansdown share price forecast is 1,022.23p, which is 5% below the current price level.
