H&T (HAT:AIM) 646p

Gain to date: 71.5%

We highlighted the potential for a breakout at H&T (HAT:AIM) on 10 October 2024, arguing a share price dip at the UK’s biggest pawnbroker presented a buying opportunity at 376.7p.

Shares posited that a single digit PE (price to earnings) ratio underrated the long-term prospects of a pawnbroker and jeweller benefiting from cost-of-living pressures and an elevated gold price alike.

We also flagged H&T’s multiple long-term growth levers including significant store base expansion, and argued the company looked well-placed to deliver steady earnings progression and dividend increases in the years ahead.

WHAT HAS HAPPENED SINCE WE SAID TO BUY?

H&T’s shares rocketed higher on news (14 May) the company had unanimously recommended a £297 million takeover offer from Texas-headquartered pawn operator FirstCash (FCFS:NASDAQ) pitched at 661p per share, or a 44% premium to the undisturbed share price. The deal will see shareholders receive 650p in cash as well as the 11p final dividend, due to be paid on 27 June.

H&T said it had received and rejected multiple proposals from FirstCash since December last year, eventually engaging in talks with its suitor after a fourth offer arrived at a ‘meaningful’ increase in value. The board argues the takeover provides shareholders with the opportunity to realise the value of their holdings in cash at ‘a significant premium to the prevailing share price’ and ‘at a higher level than the H&T shares have ever traded on AIM’.

WHAT SHOULD INVESTORS DO NOW?

While the board remains confident in H&T’s ability to continue to grow, it acknowledged the risks of proceeding as a standalone and insisted ‘the support and backing of a large, well-resourced and well-capitalised, international platform significantly improves the strategic positioning of H&T in its marketplace.’

Readers who want to avoid the risk the bid falls apart and swiftly allocate capital elsewhere could sell in the open market, locking in a 71.5% profit at current levels – the shares are trading below the bid price which implies this is a done deal and a bidding war is unlikely.

Otherwise, they can accept the cash bid, pitched 75.5% above our original entry price, pat themselves on the back and await the proceeds. 

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