GAM makes a last-ditch attempt to win Liontrust’s rescue deal

GAM has tried to reassure shareholders about its offer to take over UK asset manager Liontrust, which it claims is vital to its survival.

The Swiss investment house responded, a day before its results announcement in which it expects to confirm a SFr23mn loss ($26.22mn) in the first half. They reiterated that the deal was essential to “continue as a going concern”.

GAM has been trying to persuade any remaining holdouts in recent months to accept Liontrust’s offer. However, the investor group that includes Newgame, and wealth management firm Bruellan is putting up a strong fight.

The time is running out for Liontrust to complete the deal that it announced in May. If GAM does not delay its scheduled results at the last minute, Thursday may be the final chance for the 40-year old investment house to close the deal. It was one of Europe’s largest before it fell into scandal in 2018.

GAM’s Board said last week that “Newgame’s proposals ignore the realities of business and do not offer a credible way forward.” “They don’t provide the immediate funding required and underestimate the size of the funding required to restructure and support the business as a continuing concern. Liontrust is your only option.”

GAM portfolio managers have also expressed support for the deal. Liontrust chief executive John Ions warned that the clock was “one minute before midnight” in GAM’s future.

GAM is still recovering from its involvement in Greensill,, which led to the expulsion of one of their star managers, an fine of £9.1mn for conflicts of interest and a 96% drop in its share value.

Liontrust of London, which in the past 11 years has acquired seven smaller asset management firms, made a proposal to acquire GAM in May. This was a decision that was quickly endorsed by GAM’s board and fund managers. Liontrust, as part of its offer, extended a £17.8mn to GAM. Half of this loan has already been paid. The arrangement will end at the end the year if it is not completed.

Last week, it extended to Friday the deadline for its tender for GAM shares. The company also removed the clause requiring GAM to sell its fund management business in order for the deal proceed. It issued a second statement of support by GAM fund managers. The company stated that “the acquisition is Liontrust’s final and complete offer.”

But activist investors, led by French telecoms millionaire Xavier Niel who claims to own 9.6 percent of GAM shares, are opposing Liontrust and GAM. They claim that the proposal undervalues GAM and the value a turnaround can bring to shareholders. So they have made their own offer of 17.5 percent at SFr0.55 a share.

Albert Saporta, Newgame’s chief executive officer, said he received “everyday” calls from GAM investors saying that they would not accept Liontrust’s offer.

“It’s arrogant and presumptuous for Liontrust management to believe that it alone can create shareholder value. . . He said that the deal was not popular. Newgame also stated that the loan from Liontrust meant GAM was recommending an offer by “the last resort creditor”. . . “with a pistol [to] head”.

The proposed merger has been described as “lopsided” by the company, given that GAM shareholders will own 12.6% of the combined entity despite having contributed about 40% of assets under management.

GAM stated that Newgame made the offer with a “highly questionable condition”: Newgame would have to take full control of GAM’s board. It requires approvals for the change of control from different regulators.

Uncertain is how many GAM shareholders will accept Liontrust’s offer. Silchester, a shareholder that holds 17.3 percent of GAM shares, has publicly expressed its support.

In a statement last week, GAM chairman David Jacob said: “I recognize that this has proven to be a difficult journey for shareholders.” “However at this crucial point, I urge that you tender your shares to the Liontrust offer.”