Xavier Niel offers risky alternative for sick GAM

Gam Holding AG

08/06/2023 11:06

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are their own.)
       LONDON, June 8 (Reuters Breakingviews) - French
billionaire Xavier Niel is asking investors to have one last
flutter on GAM  GAMH.S . An investor group backed by Niel and
partner Bruellan is calling for shareholders to reject the $98
million lossmaking fund manager’s proposed merger with Liontrust
Asset Management  LIO.L , throw out the company’s board and back
its own turnaround plan. It’s a risky option.
    The rebel group, which controls 9.2% of GAM’s shares, is
right that the deal on offer from Liontrust is far from
appealing. GAM investors will receive shares in Liontrust worth
around 0.5% of the target company’s assets under management back
in May, and even less now. They will keep less than 13% of the
business, despite contributing around 40% of its assets under
management. 
    Niel’s turnaround would be funded by a $28 million
convertible bond to fund GAM’s losses, accompanied by aggressive
cost cuts to get the group back to profitability. If all goes
well, GAM’s current investors could still keep a much larger
share of the upside than they would with the Liontrust deal. The
risk, however, is that GAM’s turnaround proves hard, cost cuts
are more expensive and damaging, and the group keeps losing
assets or staff.  Moreover, it’s plausible that Niel wins enough
backing to block the deal, but not enough to replace the board,
leaving GAM in limbo. GAM shareholders have lost over 90% of
their money over the last five years. Arguably, they have little
left to lose. (By Neil Unmack) 

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 (Editing by Liam Proud and Streisand Neto)
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