GAM will need £89m to survive if Liontrust deal fails
- Liontrust’s bid would create a company with £53 billion in assets under management
- Rock Investments has proposed to provide GAM with £22.3m convertible bonds
GAM has urged a large group of investors to accept “the reality” of their financial condition and reiterated its call for shareholders to support Liontrust’s takeover bid.
The Swiss fund manager warned that if the proposed takeover fails, the company will need four times the current offering from a competing group of investors to survive.
Last Thursday, Rock Investments wrote to the Swiss wealth manager’s board of directors with a proposal to provide GAM with 25 million Swiss francs (22.3 million pounds) of convertible bonds.
The approach is intended to replace loans that Liontrust Asset Management made to GAM should the London-based company’s takeover approach fail.
New idea: Last Thursday, Rock Investments wrote to the Swiss wealth manager’s board of directors with a proposal to provide GAM with 25 million Swiss francs (22.3 million pounds) of convertible bonds
But GAM rejected Rock’s plan, saying it was “insufficient in the short term to sustain GAM as a going concern” and that a minimum capital injection of at least CHF 100 million was required.
GAM urged Rock to “acknowledge and accept the realities surrounding GAM’s financial position should the Liontrust bid be declared unsuccessful.”
The company said, “It is important that Rock publicly acknowledges and accepts that the funding required to stabilize GAM is significantly higher than the net proceeds of Rock’s proposed convertible bond.”
The company continues to advise shareholders to support the £96m takeover of Liontrust, which would create a company with £53bn in assets under management.
Earlier this month, Liontrust extended its offer period for a third time, giving investors until 4 p.m. Aug. 23 to approve the deal, almost a month after the original deadline.
On Monday, GAM said the proposal was the “only viable option in the interests of all stakeholders,” adding that the enlarged company would have a “strong balance sheet, a broader range of excellent investment products, a global distribution footprint and the capability to do so.” Delivering synergies and growth”.
Investors were told that the first tranche of a CHF 10 million loan to fund GAM’s losses and UK pension payments in July and August had been drawn down.
A second loan will be available once Liontrust’s offering is complete.
Rock, which controls a 9.6 percent stake in GAM, opposes Liontrust’s bid, claiming that the company “significantly undervalues” the company and faces unattractive “execution risks”.
The group also believes Liontrust is an unsuitable owner given how much the company’s share price has fallen in recent years relative to other fund managers.
Liontrust Asset Management stock has nearly halved in value this year. They were down 0.5 per cent at 592.5 pence late Monday afternoon.
Rock has released a “100-day turnaround plan” for GAM that would include the capital investment, appointment of a new board of directors, and alignment of cost structure with assets under management.
Liontrust chief executive John Ions said the plan lacked sufficient detail, including how the necessary restructuring would be funded while keeping GAM a “growing and profitable” company.