It’s decision time for potential owners of Hargreaves Lansdown.
A trio of private equity heavyweights have until Wednesday to make a formal bid for Britain’s biggest investment platform, or walk away. This follows its £4.7bn tilt, rejected in April.
The unsolicited £9.85 per share approach marks a milestone for the company, which looks after £142 billion in savings and pensions for its almost two million customers. It has revolutionized the savings market since it was created by Peter Hargreaves and Stephen Lansdown 33 years ago.
By eliminating commission-hungry middlemen, they enabled millions of ordinary savers to choose and trade their own stocks and funds.
It also made the co-founders multimillionaires. They still own a quarter of the shares and are open to offers, so they effectively have the fate of the company in their hands.
Calling the shots: Stephen Lansdown (left) and Peter Hargreaves own a quarter of the company’s shares.
Hargreaves, 77, the largest individual shareholder with a 20 per cent stake, told the Daily Mail he was “looking at all options” and “watching with interest”.
Lansdown, 71, told Bloomberg news agency. “It is interesting to see how third parties now see the value of Hargreaves Lansdown and are looking to capitalize on it.” Hargreaves has been an outspoken critic of previous management, telling the Financial Times that he had presided over “a disaster” that had halved the share price.
He blamed rising costs and a move toward financial advice, a heavily regulated area that big banks and nimble digital players have also rushed into.
The firm is still reeling from its association with fallen stock picker Neil Woodford, whose funds it promoted even as they were sailing toward the rocks. He has also been criticized for his fees, charging 0.45 per cent a year to invest on his platform, compared to 0.25 per cent for rival AJ Bell.
The Financial Conduct Authority is on the case, citing new consumer rights rules that require financial firms to deliver “good outcomes” to customers. The company’s fees “have not yet been understood,” said Andrew Crean of Autonomous, an independent research house.
What attracted interest in the offering is that Britain’s biggest fund supermarket makes most of its profits risk-free. It has been one of the biggest winners from the recent sharp rise in interest rates because clients typically keep a tenth of their portfolio in cash.
The Bristol company deposits it with the Bank of England at an overnight rate of 5.25 per cent, paying customers a lower interest rate (3 per cent on a cash Isa of up to £10,000 ) and keeps the difference. This earned it £269 million last year (two-thirds of profits), up from £50 million in 2022.
Other platforms such as AJ Bell and Interactive Investor also make money this way, but they do not dominate the sector.
Chief Dan Olley, who took over last year, has controlled costs and cut digital advice.
But analysts fear he may not have time to implement his strategy.