Investment platform Interactive Investor snaps-up rival The Share Centre for £62m, but shareholders will be paid in unlisted company shares
- The Share Centre investors will receive 41p in a combination of cash and shares
- That’s a 40% premium to The Share Centre’s closing price of 29p on Friday
- Interactive Investor said tie-up necessary to keep up with rivals
DIY investing platform Interactive Investor is to buy rival the Share Centre for £62million in another round of consolidation in the investment industry.
Under the deal, Share Centre investors will receive 41p in a combination of cash and shares, which is a 40 per cent premium to its closing price of 29p on Friday.
But the new Interactive Investor shares that small shareholders will be paid in are in a company that it admits is unlikely to be listed on any stock exchange within the next 12 months.
This means that Share Centre investors will swap shares they can buy or sell for those they would find much harder to cash in, just seven months after fund manager Neil Woodford came under fire for holding unlisted company shares and saw his fund wound up.
Deal: The Share Centre has agreed a £62m takeover offer by rival Interactive Investor
Interactive Investor is part owned by US private equity firm JC Flowers and if it eventually decides to list the DIY investing platform on the stock exchange, investors could see their shares rise in value.
It has been substantially building its business to take on DIY investing giant Hargreaves Lansdown.
Investors in fellow rival platform, AJ Bell, have been richly rewarded since it listed on the stock exchange, with shares currently trading at 389p – up 143 per cent on the 160p flotation price but down from a peak of about 470p in May.
The stock market announcement said that based on the new shares being issued the combined Interactive Investor company would be worth £675million. Hargreaves Lansdown is worth £7.9billion, while AJ Bell is worth £1.59billion.
Interactive Investor said the merger is needed to ‘sustain the level of profitability’ needed to keep investing in the platform’s technology amid rising competition.
‘Therefore, there is a strong strategic rationale for consolidation among compatible groups,’ Interactive Investor said.
It comes as active fund manager Jupiter confirmed a proposed acquisition of smaller rival Merian Global Investors today.
The new Interactive Investor shares offer
The stock market announcement of the offer said this about the new shares:
‘The New ii Shares will be unlisted securities.
‘There is no current expectation they will be listed or admitted to trading on any exchange or market for the trading of securities for at least the next 12 months.
‘ii has no other shares admitted to listing or trading on any stock exchange. The ii Articles contain restrictions on the transfer of ii Shares.
‘Although ii will seek to facilitate transactions between ii Shareholders where possible and appropriate, ii Shares will not be liquid and, accordingly, ii Shareholders may not be able to realise their investment in ii.’
Share Group, the owner of The Share Centre, said it will recommend shareholders to vote in favour of the merger at its annual general meeting. Its shares were 17 per cent higher at 34p towards markets close on Monday.
Interactive Investor currently has over £30billion of assets under administration, over 300,000 customers and more than one million users.
Share Group chairman Gavin Oldham said the tie-up aims to ‘transform the prospects for individual share ownership and personal investment’ across the UK.
He added: ‘[…] We have been prepared to investigate how others, who share our ambition for a more egalitarian form of capitalism, would work with us in order to achieve it.
‘With our prospective new colleagues in Interactive Investor we have discovered just such a meeting of minds, and a shared purpose for the future.’
Richard Wilson, the chief executive of Interactive Investor, said the deal would reinforce the company’s position ‘as a leader in the retail investment services marketplace’.
‘Combining our individual strengths brings further scale and the opportunity to deliver enhanced value, service and customer experience to an enlarged customer base,’ he added.