Liontrust shares jump as GAM bid looks set to fail

(Sharecast News) - Liontrust Asset Management announced on Thursday that its takeover bid for GAM Holding, originally announced on 13 June, had likely failed. The company said that by 23 August, it had received tenders for a total of 53,250,357 GAM shares, representing 33.45% of the GAM shares available for the offer, falling short of the required minimum acceptance level set by Liontrust for the transaction to proceed.

Given the current preliminary findings, the board said the offer was not expected to meet the minimum acceptance level set by Liontrust.

Unless there was a notable discrepancy between the provisional and the definitive interim result that fulfilled the minimum acceptance criteria, Liontrust said it was likely to announce the offer as unsuccessful on 29 August.

Despite many of the anticipated costs of the offer being contingent, Liontrust said it was set to bear a one-off exceptional charge capped at £11m.

Of that, around £2m was already accounted for in the financial year that ended on 31 March.

The expenditure mainly pertained to corporate finance, legal fees from various jurisdictions, accounting services, and third-party due diligence.

Liontrust also confirmed its commitment to its progressive dividend policy on Thursday, stating that for the financial year ending 31 March next year, its board was aiming for a dividend of at least 72p per share.

"Liontrust made a full and fair offer for GAM, which reflected the financial reality of the business and would have provided a certain and sustainable solution," said chief executive officer John Ions.

"Throughout this process, Liontrust has sought to create corporate and financial stability for GAM and do what is in the best interests of its shareholders, clients and employees.

"We have always believed that Liontrust's offer and strategy for ensuring the growth of the combined group is the best way to achieve this."

Ions said Liontrust was impressed by the quality, dedication and professionalism of everyone at GAM, including the investment managers and distribution teams globally.

"We wanted to give this talent the platform to flourish and were excited by the fantastic potential for growing the combined businesses through providing the investment managers with the necessary profile and enhancing support for distribution.

"We are disappointed we did not win the support of the majority of GAM's shareholders and are grateful to those GAM and Liontrust shareholders who did back our offer.

"We also thank everyone at GAM for working so hard to make our offer succeed - we hope that GAM is able to achieve a positive outcome for the business."

John Ions explained that GAM presented an opportunity to accelerate Liontrust's strategic objectives.

"While this is not the result we wanted, our strategy will not change, with a continued focus on expanding distribution and the client base, diversifying the product range, attracting talent and enhancing the investor experience.

"The financial health of the Liontrust business, power of our brand, excellent investment teams and strength of sales and marketing gives me great confidence we will achieve these objectives."

Analysts at Numis said the deal would have been a value destructive one from a Liontrust perspective, noting that the share price had lost around 37% of its value since before the GAM rumours emerged, although some of that was due to weaker than expected trading of the existing business.

"In theory therefore, this result should be a positive one to the Liontrust share price.

"Based on our existing modelling, we will need to explicitly remove the -158p per share which we calculated as the net value destruction from proceeding with the deal.

"We will however need to factor in the incremental costs incurred of -£9m [or] -14p per share, as disclosed by Liontrust today."

However, Numisi said there was also the matter to consider of how recoverable the -£18m, or -28p per share, loan to GAM already made would be, as well as the subjective issue of any attrition of Liontrust management credibility from the failed deal, including whether there was any regulatory impact from the allegations made of improper conduct in recent days.

"It also remains to be seen whether there will be any temporary or lasting damage that has been done to the Liontrust brand as a result of this debacle.

"Our current thinking is that this all would probably imply a net increase in our valuation of below 100p per share all things considered and all else equal.

"We note that this back of the envelope estimate is subject to change based on further and more detailed analysis in due course."

Once the dust settled, Numis said attention would naturally return to the existing business, which it noted had remained in outflow.

"Whilst we think the shares could enjoy a minor relief rally today to reverse some losses incurred since the deal was announced, we think it is highly unlikely that the full share price losses will be significantly recovered any time soon.

"We would continue to avoid the shares."

At 0847 BST, shares in Liontrust Asset Management were up 10.12% at 664p.

Reporting by Josh White for Sharecast.com.