GAM needs £89 million to survive if Liontrust deal falls through
- Liontrust’s offer would create a company with £53 billion in assets under management
- Rock Investments has proposed to provide a £22.3m convertible bond loan to GAM
GAM has called on a major investor group to “accept the reality of its financial position” as it reiterated its call to shareholders to support Liontrust’s takeover bid.
The Swiss fund manager warned that, should the proposed takeover fail, it would need a cash injection four times larger than what is currently being offered by a rival investor group to survive.
Last Thursday, Rock Investments wrote to the Swiss asset management board with a proposal to provide a 25 million Swiss franc (£22.3 million) convertible bond to GAM.
The approach is intended to replace loans provided to GAM by Liontrust Asset Management should the London-based company’s takeover approach fail.
New idea: Last Thursday, Rock Investments wrote to the board of directors of the Swiss asset manager proposing to provide a 25 million Swiss franc (£22.3 million) convertible bond to GAM
But GAM has rejected Rock’s plan, saying it would be “insufficient to sustain GAM in the short term” and that a minimum capital injection of at least CHF 100 million is required.
GAM urged Rock to “acknowledge and accept the reality regarding GAM’s financial position, if Liontrust’s offer is declared unsuccessful.”
The company said: “It is essential that Rock publicly acknowledges and accepts that the level of funding required to stabilize GAM is significantly in excess of the net proceeds of Rock’s proposed convertible bond.”
It continues to advise shareholders to support Liontrust’s £96 million buyout, which would create a company with £53 billion in assets under management.
Earlier this month, Liontrust extended its offering period for a third time, giving investors until 4 p.m. on August 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 interest of all stakeholders,” adding that the expanded company would have a “strong balance sheet, a broader range of excellent investment products, a global distribution footprint and the ability to deliver synergies and growth’.
It told investors 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.
A second loan will become available if Liontrust’s offer is completed.
Rock, which has a 9.6 percent stake in GAM, opposes Liontrust’s offer, claiming it “significantly undervalues” the company and is subject to unattractive “contingencies.”
The group also believes that Liontrust is an unsuitable owner given that the company’s share price has fallen relative to other fund managers in recent years.
Liontrust Asset Management Shares have almost halved in value this year. They were 0.5 percent lower Monday afternoon at 592.5 pence.
Rock has released a ‘100-day turnaround plan’ for GAM, in which in addition to the capital investment, a new board is appointed and the cost structure is aligned with the assets under management.
Liontrust CEO John Ions said the blueprint lacked sufficient detail, including how the necessary restructuring would be financed while GAM remained a “growing and profitable” company.