Investor group NewGAMe wrote to GAM shareholders yesterday (20 July) urging them to "hold off" making a decision on the "ridiculous" Liontrust offer and wait until the last minute to do so.

In its letter, the company - which alongside Bruellan holds a 9.6% stake in GAM - told shareholders Liontrust is likely going to have to extend the tender period and "bump" its offer, reports Investment Week.

It reiterated the Liontrust offer of CHF 71m (£63.3m) undervalues the business, which it said will deliver around CHF 35-40m in EBIT in 2025, according to Liontrust's own estimates. As a result, NewGAMe added the offer is not "fair" and stands below the range of values identified by the GAM board in its fairness opinion of CHF 0.54 to CHF 1.16 per share, compared to Liontrust's CHF 0.45 per share.

The investor group said: "Any rational investor considering tendering but agreeing that the offer is not fair should therefore wait until the last minute to tender. Shareholders that have already tendered or are considering tendering at the current terms must be a small minority by now."

According to NewGAMe, investors not tendering or waiting to do so have three options: wait for Liontrust to bump its offer, tender to NewGAMe's partial offer in September, or get on board with the investor group's turnaround plan for the Swiss company.

The company also criticised Liontrust's "troubling governance issues" - more specifically the FMS transaction and credit facilities to GAM - which GAM's chair David Jacob is yet to address after being asked by NewGAMe twice, it explained.

The investor group added: "If satisfactory answers are not provided at the latest during the 25 August EGM, a special audit will need to be put in place. We wonder, for example, how it is possible for the board to recommend, without any conflict of interest (to put it lightly), an offer made by its ‘lender of last resort'.

"This is exactly what has happened at GAM. Liontrust extended a supposed lifeline to GAM (the first tranche of a CHF 20m loan) before completion of the deal, which then must be approved and recommended by GAM's board. This is not only unusual. It is unprecedented."

NewGAMe claimed GAM's board had to recommend the Liontrust offer "with a gun on its head".

On the FMS deal, it claimed no proper auction was held and there was a "lack of transparency" in a deal, the value of which was "close to zero".

It added: "We object to GAM's message to shareholders that it is on the verge of collapse, a collapse brought about by the same management and board that is now trying to sell the company as fast as they can scream ‘bail me out'."

NewGAMe explained the repayment of Liontrust's loan should not be used as a way to pressure shareholders to vote in favour of the offer, as it said in a worst-case scenario, it would need to find a one-month bridge finance before it is able to issue CHF 25m convertible bonds, as in the agenda of the EGM on 25 August.

"NewGAMe's recommendation remains: do not tender to the Liontrust offer," the company concluded.

Liontrust has hit back at NewGAMe's letter, saying its offer is "full and final" and will not be increased.

It explained: "Liontrust has conducted extensive and co-operative due diligence in relation to GAM, over many months, which validates Liontrust's view that this is a good and fair offer to GAM shareholders.  

"Liontrust's offer takes account of the current financial run rate losses of GAM (including its regulatory capital position, its lack of free cash and its need for external financing) and its future contractual liabilities, as well as the significant restructuring costs required to bring GAM to break even as quickly as possible. Liontrust's due diligence also confirms the two businesses are highly complementary and the significant opportunities offered by combining the two groups.   

"It is imperative that the future of GAM is resolved as quickly as possible to provide immediate financial and corporate stability for GAM to preserve value for shareholders and give certainty to clients. There is no other offer for the entire issued share capital of GAM and the proposed acquisition provides a corporate resolution without further uncertainty and instability. "

 

This article was first published on sister website Investment Week.