Abrdn in £1.5bn talks to buy DIY stock-picker Interactive Investor

Published

3 years ago

November 6, 2021

admin

Abrdn, the FTSE-100 asset manager, is in advanced talks to buy Interactive Investor (II) for more than £1.5bn – a deal that will hand it control of one of Britain’s three big DIY stock-picking platforms.

Sky News can reveal that abrdn, headed by Stephen Bird, is in exclusive negotiations to acquire II and hopes to strike a formal takeover deal within the next fortnight.

Abrdn is likely to be forced to confirm the discussions in a stock exchange announcement on Monday morning.

If successfully concluded, the talks will end II’s preparations to join rivals Hargreaves Lansdown and AJ Bell on the London stock market following months of talks about a 2022 flotation.

II has more than 400,000 personal investing clients, positioning it behind only Hargreaves Lansdown by customer numbers in the UK market.

It has made a string of acquisitions of its own, such as the stock-dealing platform The Share Centre, and has about £57bn in assets under administration.

The bold swoop by abrdn which takes it further into direct-to-consumer investing will represent a calculated gamble for Mr Bird, a former Citi executive who joined the asset management group in July 2020.

He has hinted at a desire to pursue targeted acquisitions which help it to diversify its revenue base across three areas: investment, adviser and personal.

Acquiring II would deliver on that ambition in personal investing, and transform abrdn’s digital capability and consumer appeal, one analyst said on Saturday.

Last month, abrdn bought Finimize, a subscription-based investment tips service – a much smaller deal, but one which nevertheless underlined the group’s pivot towards personal investing-oriented activities.

One area of uncertainty for Mr Bird will relate to abrdn shareholders’ reaction to the II news given his predecessors’ decidedly mixed track record in corporate deal-making.

Investors were left underwhelmed by the £11bn merger of Standard Life and Aberdeen Asset Management in 2017, with the combined group having lost close to half its value since the tie-up was announced that year.

Since then, the co-chief executives of Standard Life Aberdeen – now renamed abrdn – have both stepped down.

Martin Gilbert, the Aberdeen Asset Management founder, has emerged in a large number of City posts, including at the helm of AssetCo, which he has begun using as a consolidation vehicle in the asset management sector, while Keith Skeoch remains chairman of the Financial Reporting Council and Investment Association.

For Mr Bird, however, the transaction may come at an opportune time.

Abrdn has total surplus regulatory capital of about £2bn, having sold another chunk of its stake in India’s HDFC in late September, meaning financing the takeover of II is unlikely to be problematic.

The deal also comes sufficiently early in his tenure as CEO to make a potentially significant difference to the long-term performance of abrdn, which has been hit by large fund outflows during most of the period since the 2017 merger.

Under Mr Bird, the tide has begun to turn, with fee-based revenues and adjusted operating profits recently showing their fastest growth since the company was created in its current form.

He has said he wants to turn abrdn into a simplified and more focused investment management group with far stronger digital capabilities for personal and institutional clients.

Since taking the helm of the company, which now manages more than £530bn for clients, he has jettisoned businesses including Parmenion, a platform servicing independent financial advisers, and a real estate division in the Nordics.

Its rebranding in August – which provoked some derision in the City – would, Mr Bird, said, provide “clarity” and leave it “better-positioned to have impact at scale as a global business”.

Nevertheless, abrdn may have to contend with some discontent from rival fund managers whose products are listed on the II platform.

If the deal goes ahead, it will deliver the certainty of a handsome payday for JC Flowers, II’s biggest shareholder and other investors which include a group of venture capital funds.

JC Flowers engineered the combination of II and TD Direct in 2017, since when the business has grown into an industry powerhouse.

The size of the stake in II owned by Richard Wilson, its chief executive, is unclear, but he is expected to remain in place after the takeover, according to insiders.

Mr Wilson has been a vocal advocate for greater involvement for retail investors in companies’ public share sales, and has spoken repeatedly about the stock market being a natural home for the company.

Earlier this year, II appointed Gordon Wilson, a former Travelport executive, as its non-executive chairman as part of its planning for an IPO.

The latest steps being taken by II towards a public debut come months after a review led by Lord Hill, a Treasury board member, recommended measures to make it simpler for retail investors to participate in IPOs.

Ordinary customers are often frozen out of prominent floats, although the advent and rapid growth of services such as that offered by PrimaryBid have begun to make them more accessible.

JP Morgan is advising abrdn on the talks, while II and its shareholders are being advised by Fenchurch Advisory Partners and UBS.

On Friday, shares in abrdn closed at 255.7p, giving the company a market capitalisation of just under £5.6bn.

Abrdn declined to comment this weekend, while II has been contacted for comment.

Business

Cineworld owners screen plan for stock market comeback in New York

Published

7 hours ago

November 17, 2024

admin

Cineworld owners screen plan for stock market comeback in New York

Cineworld’s hedge fund backers are drawing up plans to return the cinema operator to the public markets amid continuing uncertainty about the future of dozens of its British sites.

Sky News has learnt that the company’s owners are at the early stages of considering a New York listing for the business, with the first half of 2026 considered a likely window for it to take place.

City insiders said that a flotation was likely to encompass Cineworld’s operations outside the UK, with the group’s board expected to consider a sale of the British operations at some point.

They cautioned, however, that no decisions had been reached and would not be for some time.

The fate of Cineworld’s business in the UK has been mired in uncertainty for months, with the company initially exploring a sale of it before turning to a restructuring plan which compromises many of its landlords and other creditors.

It has announced the permanent closure of six sites, but it emerged last month that nearly 20 more were at risk of being shut amid ongoing talks with property owners.

The restructuring plan is due to complete later this month, which some landlords have opposed over the fairness of its terms.

Documents circulated as part of the restructuring plan process highlighted the fact that the company did not have sufficient funding to meet a quarterly rent bill on June 24 of £15.9m.

“Absent this funding, the UK Group would have been insolvent on a cashflow basis,” they said.

Other cinema operators, such as Odeon, are now poised to step in to take over small numbers of Cineworld’s other sites.

The company trades from more than 100 locations in Britain, including at the Picturehouse chain, and employs thousands of people.

Cineworld grew under the leadership of the Greidinger family into a global giant of the industry, acquiring chains including Regal in the US in 2018 and the British company of the same name four years earlier.

Its multibillion-dollar debt mountain led it into crisis, though, and forced the company into Chapter 11 bankruptcy protection in 2022.

It delisted from the London Stock Exchange in August 2023, having seen its share price collapse.

In addition to the UK, Cineworld also operates in central and Eastern Europe, Israel and the US.

Cineworld has been contacted for comment.

Business

Former Tory minister Heaton-Harris eyes top job at football regulator

Published

1 day ago

November 16, 2024

admin

Former Tory minister Heaton-Harris eyes top job at football regulator

A former Conservative cabinet minister has thrown his hat into the ring to become the inaugural chair of Britain’s new independent football regulator.

Sky News has learnt that Chris Heaton-Harris, who stood down as an MP at July’s general election, is among those who applied for the role ahead of a deadline on Friday.

Mr Heaton-Harris is himself a qualified football referee who has officiated at matches for decades.

A former Northern Ireland secretary and chief whip under Rishi Sunak and Boris Johnson respectively, he said in 2022 of his part-time career as a football official: “I took a [refereeing] course and that was it, I’ve been going ever since.

“Football has done wonders for me throughout my life so I would recommend it to everybody.”

Mr Heaton-Harris is among a large number of people who have applied for the role of chair at the Independent Football Regulator (IFR), according to officials.

A publicly available timetable for the search says that interviews for the £130,000-a-year post will end on 11 December, with an appointment expected in the new year.

It is the second time that the government has embarked on a search for a chair for the IFR after an earlier hunt was curtailed by the general election.

The role will be based at the watchdog’s new headquarters in Manchester and will require a three-day-a-week commitment.

The Football Governance Bill had its second reading in the House of Lords this week, as part of a process that will represent the most fundamental shake-up in the oversight of English football in the game’s history.

The Labour administration has dropped a previous stipulation that the regulator should have regard to British foreign and trade policy when determining the appropriateness of a new club owner.

The IFR will monitor clubs’ adherence to rules requiring them to listen to fans’ views on issues including ticket pricing, while it may also have oversight of the parachute payments made to clubs in the years after their relegation from the Premier League.

The top flight has issued a statement expressing reservations about the regulator’s remit, while it has been broadly welcomed by the English Football League.

The IFR’s creation will come with the Premier League embroiled in a civil war over Manchester City‘s legal battles emanating from allegations that it breached the competition’s financial rules.

Next week, the 20 Premier League clubs will meet for a lengthy shareholder meeting, with a vote on amended Associated Party Transaction rules hanging in the balance.

The league needs 14 clubs to vote in favour for the rule changes to be passed.

Contrary to earlier expectations, however, a detailed discussion on a financial distribution agreement between the Premier League and EFL is unlikely to be on the agenda.

A Department for Culture, Media and Sport spokesperson said: “The process for recruiting the Independent Football Regulator chair is under way but no appointment decisions have been made.

“We do not comment on speculation.”

This weekend, Mr Heaton-Harris could not be reached for comment.

Business

Pizza Hut UK hunts buyer amid Budget tax hike crisis

Published

2 days ago

November 16, 2024

admin

Pizza Hut UK hunts buyer amid Budget tax hike crisis

Pizza Hut’s biggest UK franchisee has begun approaching potential bidders as it scrambles to mitigate the looming impact of tax hikes announced in last month’s Budget.

Sky News has learnt that Heart With Smart (HWS), which operates roughly 140 Pizza Hut dine-in restaurants, has instructed advisers to find a buyer or raise tens of millions of pounds in external funding.

City sources said this weekend that the process, which is being handled by Interpath Advisory, had got under way in recent days and was expected to result in a transaction taking place in the next few months.

HWS, which was previously called Pizza Hut Restaurants, employs about 3,000 people, making it one of the most significant businesses in Britain’s casual dining industry.

It is owned by a combination of Pricoa and the company’s management, led by chief executive Jens Hofma.

They led a management buyout reportedly worth £100m in 2018, with the business having previously owned by Rutland Partners, a private equity firm.

One source suggested that as well as the talks with external third parties, it remained possible that a financing solution could be reached with its existing backers.

HWS licenses the Pizza Hut name from Yum! Brands, the American food giant which also owns KFC.

Insiders suggested that the increases to the national living wage and employers’ national insurance contributions (NICs) unveiled by Rachel Reeves would add approximately £4m to HWS’s annual costs – equivalent to more than half of last year’s earnings before interest, tax, depreciation and amortisation.

One added that the Pizza Hut restaurants’ operation needed additional funding to mitigate the impact of the Budget and put the business on a sustainable financial footing.

The consequences of a failure to find a buyer or new investment were unclear on Saturday, although the emergence of the process comes amid increasingly bleak warnings from across the hospitality industry.

Last weekend, Sky News revealed that a letter co-ordinated by the trade body UK Hospitality and signed by scores of industry chiefs – including Mr Hofma – told the chancellor that left unaddressed, her Budget tax hikes would result in job losses and business closures within a year.

It also said that the scope for pubs and restaurants to pass on the tax rises in the form of higher prices was limited because of weaker consumer spending power.

That was followed by a similar letter drafted by the British Retail Consortium this week which also warned of rising unemployment across the industry, underlining the Budget backlash from large swathes of the UK economy.

Even before the Budget, hospitality operators were feeling significant pressure, with TGI Fridays collapsing into administration before being sold to a consortium of Breal Capital and Calveton.

Sky News recently revealed that Pizza Express had hired investment bankers to advise on a debt refinancing.

HWS operates all of Pizza Hut’s dine-in restaurants in Britain, but has no involvement with its large number of delivery outlets, which are run by individual franchisees.

Accounts filed at Companies House for HWS4 for the period from 5 December 2022 to 3 December 2023 show that it completed a restructuring of its debt under which its lenders agreed to suspend repayments of some of its borrowings until November next year.

The terms of the same facilities were also extended to September 2027, while it also signed a new 10-year Pizza Hut franchise agreement with Yum Brands which expires in 2032.

“Whilst market conditions have improved noticeably since 2022, consumers remain challenged by higher-than-average levels of inflation, high mortgage costs and slow growth in the economy,” the accounts said.

It added: “The costs of business remain challenging.”

Pizza Hut opened its first UK restaurant in the early 1970s and expanded rapidly over the following 15 years.

In 2020, the company announced that it was closing dozens of restaurants, with the loss of hundreds of jobs, through a company voluntary arrangement (CVA).

At that time, it operated more than 240 sites across the UK.

Mr Hofma and Interpath both declined to comment.