Jed Mires;306812 wrote:The word on the streets is that CVC is going to come back with an improved offer. The game plan is to take the company private with a controlling interest in the company. The strategy is to cut the platform charges to match other platforms, invest to grow the platform, and pay out juicy dividends. This will be achieved by borrowing. The juicy dividends will be used to keep Peter Hargreaves on board. Peter will be used to keep the existing fund customers from running scared.
That sounds good on paper, but remember there are PE outfits who simply take on a good cash generative business and then use it get access to finance and credit (a fundraising of sorts), dry the business and then push it back laden with debt whilst, and, if they have paid out all the interim income and growth via dividends, then what may be left is a carcass using future income to service the debt and running costs.
What is more is that when taken private the reporting requirements and divulging of information is less of a requirement, thus you need to look at the data yourself more closely. The continuation of divi is a bit of a conundrum in that the PE outfit uses your assets to raise finance and gets the company and existing shareholders to service and pay the debt back and at the same time can bleed the company by paying itself a lion share of the divis. In other words the PE gets all its monies back and then some whilst existing shareholders may not.
That is the bad side and what has happened to a lot of healthcare businesses in the US. It is HL who will own and be responsible for the debt and not the PE outfit. But that does not mean that all the debt will be used by HL
The good side is if they do act in a good manner then they could relist again and make the shareholders even more monies.
HL for all its faults, high charges and scandal is a good UK company and seeing it go is a shame.