Capital Calls: GAM takeover saga

- GAM takeover

Hang up. Telecoms mogul Xavier Niel is leading a charge to force Liontrust Asset Management to improve its offer for ailing fund group GAM. The billionaire has a good track record in activism, having agitated to block a rights issue at Unibail-Rodamco-Westfield. But getting a better deal at GAM looks hard.

NewGAMe, backed by Niel, and its partner Bruellan are right that the Liontrust offer is far from appealing. It is made in the UK-listed bidder’s shares, leaving investors exposed to any decline in the value of a company that is itself losing assets. The current value, after a sharp fall in Liontrust’s equity, is around 83 million Swiss francs in total, some 30% below GAM’s price when the deal was announced, and less even than the cash on GAM’s balance sheet.

Yet extracting a higher offer looks tricky. GAM has been on the market for years. The value of its assets keeps shrinking, and it is expected to make a net loss for the next three years, according to analyst estimates gathered by Refinitiv. Any rival bidder would need to provide funding to keep regulators and auditors happy, as Liontrust is.

The agitators hope to exceed a 10% stake, enough perhaps to stop Liontrust from taking full ownership of GAM. That may give them power to force a higher price, but not much: the would-be buyer’s stock is down 18% since the first reports of a deal, compared with a 2% fall for the Refinitiv Europe Investment Management and Fund Operators Index. A giant sweetener from Liontrust, or a bidding war, seem unlikely. And while the activists wait, GAM’s standalone prospects just keep getting worse. (By Neil Unmack)