GAM has urged investors to accept the proposed takeover bid from Liontrust, arguing that the deal is necessary for the stability of the business.
In an investor presentation yesterday (11 July) seen by Investment Week, GAM emphasised its reliance on a conditional loan from Liontrust to continue running the business, as well as the restructuring necessary to return it to profitability.
Following the approval from Liontrust shareholders at the firm's annual general meeting last week (7 July), GAM has continued to urge its investors into accepting the deal, despite pushback from shareholders.
Investor group NewGAMe and Bruellan, which holds an 8.4% stake in GAM, has consistently campaigned against the deal, arguing it undervalued GAM.
This led them to petitioning Swiss regulator FINMA and calling an extraordinary general meeting on 25 August to replace the board.
Pushing back on the shareholder revolt, GAM wrote yesterday that the proposal from NewGAMe provided "no certainty" and had "no due diligence".
The proposed provision of liquidity also "materially dilutes existing shareholders and gives NewGAMe full control of board," it argued.
In contrast, GAM said that the acquisition with Liontrust would form a "strong complementary businesses", with the bid being "the only credible offer received during the 12 month strategic review" of the firm.
"Shareholders will have certainty and the opportunity to participate in the potential growth of the enlarged group if they tender their shares," the firm said. "They are not being ‘cashed out' nor are they being diluted."
Loan and savings
The offer from Liontrust in May came with a CHF 20m (£17.6m) loan facility, with GAM stating that the loan was "critical in order to support the business".
However, if the offer was rejected, it said the loan facility would fall away and "would risk immediate uncertainty for the business".
"The loan provides a clear pathway to resolve the financial position of the group in the short term until closing the proposed acquisitions," it added.
GAM also emphasised that in order to return the firm to profitability, "significant costs need to be taken out".
It reported that Liontrust had identified CHF 64m (£56.4m) of savings throughout the firm, but will require CHF 50m (£44m) to achieve the targeted cost savings
"GAM group's available cash is insufficient to fund a major restructuring of its cost base whilst funding ongoing operating losses," it added.
Furthermore, the firm argued that there were synergies from the combination of two asset managers, and said that as a standalone firm, "GAM's achievable savings are significantly below this level".
The firm's cash position sat at CHF 4.9m (£4.3m) at the end of 2022, it reported, and said that while this balance was still positive, provided "very little headroom".
In the presentation, GAM said that the Main Offer period is due to end on 25 July, with an Additional Offer period to be opened up between 2-15 August if the offer is declared a success.
The firm added that the planned settlement would be expected to come in the final quarter of 2023.
"The board continues to unanimously recommend the offer and it is strongly supported by our senior portfolio managers," it concluded.
