Investor group NewGAMe has published an open letter to GAM's shareholders, responding to Liontrust's questioning of the legality of the its offer, and some of GAM's own claims made on Monday (24 July).

The letter, signed by Albert Saporta as the director of NewGAMe, comes after GAM posted a statement earlier today (26 July), stating it stood by its communication over the deal with Liontrust and urging shareholders to accept.

In the latest development of the ongoing spat between the group of investors, which controls approximately 9.6% of the issued share capital of GAM, and the asset managers, NewGAMe said "serious governance questions" had been raised.

GAM pushes back against shareholder inaccuracy claims

The group previously made its own partial cash tender offer, which Liontrust said might not be legally compliant or subject to unachievable conditions, but in the letter, NewGAMe levied that this was actually case for Liontrust's offer, which the asset manager recently announced was final and for which it has extended the tender period for another three days.

"It is one thing for GAM and Liontrust to argue their case, it is another to imply that NewGAMe's offer might not be legally compliant with Swiss takeover laws or that it is subject to supposedly unachievable conditions when the Liontrust offer is subject to the same ones," the investor group said.

NewGAMe said this is likely to protect Liontrust's reputation as a buyer, and that GAM trading at a substantial premium to the terms offered by Liontrust ever since the deal was announced suggests a low tender ratio despite the approaching first tender period deadline, which can in fact be extended by up to 40 trading days.

"Liontrust wants you to think that GAM is in such distress that the value being offered is fair and could not be possibly increased so as to generate some ‘panic tendering'. GAM is facing real issues, no doubt. But as we have said repeatedly, the Liontrust offer is anything but fair," it said.

The 'magic' 66.7%

Liontrust's deal, which is conditional to the acceptance of the offer by 66.7% of GAM shareholders, is structured as a share-for-share exchange offer, which would result in GAM shareholders owning about 12.6% of the combined group at completion, expected in the fourth quarter this year. 

In today's letter, NewGAMe rejected Liontrust's claim that extending the tender offer by three days suggests that it is close to the "magic" 66.7% shareholder acceptance rate.

"This seems to be another ploy to generate more tendering. We know it is nearly impossible for Liontrust to be close to 66.7%. In fact, it can only be quite far from it," it said.

"Except for three days, GAM has been trading at a substantial premium to the terms offered by Liontrust ever since the deal was announced. This simple fact suggests that the tender ratio must be very low."

But it was Liontrust's announcement on Monday that it was waiving the condition requiring GAM to sell its Fund Management Services (FMS) business from its acquisition offer that "infuriated" the investor group the most. 

Liontrust waives FMS sale condition from GAM offer

GAM agreed to sell its loss-making third-party FMS businesses in Luxembourg and Switzerland to Carne Group at the end of June. The sale is still expected to conclude in the fourth quarter of 2023. 

NewGAMe has argued that Liontrust imposed on GAM a fire sale of FMS in order to fit the calendar of its own deal with GAM, in a way that raises serious governance questions and with the condition itself leading to value destruction.

"Now, Liontrust is telling us that this fire sale on an accelerated timetable was not necessary to complete the deal? Are you kidding me? We know for a fact that a number of significant competitors to Carne were not even invited to the bidding process for FMS," the letter said.

"We have asked GAM's board many questions regarding this selling process. These questions, simple for most parts, remain unanswered. 

"Now that the FMS Exit Condition is being waived, it would be useful for GAM's board to reply to our questions so as to avoid the disgrace of the special audit that we will request at the August 25 EGM in order to have the answers and determine that the FMS transaction was not flawed in any ways."

Response to 'misleading' claims

NewGAMe also responded to GAM's recent announcement on these points, stating that the asset manager was misleading shareholders "from the first line to the last".

While GAM stated its senior fund managers had reaffirmed their "strong support for the Liontrust offer", the investor group questioned the truth in this and said it had received emails of support from GAM employees for its own offer and that they had given them their vote to revoke the current board.

The letter also accused GAM of trying to make shareholders believe the group was a "bunch of amateurs" and said it would not rise to this.

"We have made our points and the market seems to agree. Liontrust is NOT the only viable option and GAM can strive as a standalone company," the group reiterated.

"We remain committed to maximizing the future value of GAM for all stakeholders and look forward to continuing to discuss our thoughts further with our fellow shareholders."

Liontrust declined to comment. GAM has been contacted for comment.