GAM – Liontrust deal fails to win support, Board turn to investor group NewGAMe

The proposed acquisition of GAM Holding AG, parent company to GAM Investments and home to one of the largest catastrophe bond fund strategies, by specialist fund management group Liontrust has failed to win the necessary investor support, with the GAM Board now turning to discussions with the rival investor group NewGAMe.

As a reminder, GAM Holding AG had been heading for an acquisition by specialist fund management group Liontrust.

The acquisition would see all of the GAM investment funds rebranded, presumably including its large GAM Star Cat Bond Fund and other ILS strategies that are portfolio managed by specialist insurance-linked securities (ILS) manager Fermat Capital Management.

Subsequent to the original acquisition agreement, a counter-offer from investor group NewGAMe and Bruellan emerged, offering to buy GAM’s shares at a 29.1% premium to the Liontrust arrangement, but the GAM board said it would continue to pursue the Liontrust offer, as it is a full acquisition rather than an acquisition of a portion of its shares.

The deadline for the offer period related to the Liontrust offer was yesterday, and it is now clear shareholder support was insufficient to get the Liontrust deal over the line.

GAM’s Board said there is an “expectation that they will declare it (the Liontrust offer) unsuccessful on 29 August 2023.”

Adding, “The GAM Board has entered into constructive and productive discussions with representatives of the investor group “Newgame”, including Rock Investment SAS (“Rock”), Newgame SA and Bruellan SA. These discussions are focused on agreeing short term bridge financing which has been offered by Rock on 18 August 2023.

“In addition, Newgame has recognised the need to ensure that GAM has appropriate and adequate financing to continue as a going concern.”

Importantly, GAM recognises the need to ensure its portfolio managers are aligned with its plans.

As we reported yesterday, catastrophe bond investment specialist Fermat Capital Management had been unwittingly dragged into the tussle over GAM, which drove home the importance of the relationship and also the significant value Fermat has generated for GAM over the years.

Liontrust’s Chief Executive had told some GAM shareholders in an email that Fermat could walk away, if his deal did not go through, and that co-founder of Fermat John Seo had “questioned the integrity of NewGAMe.”

John Seo subsequently denied all of this, as we reported, and asked Liontrust Chief Executive John Ions to retract his email.

Which may have been a final nail in the coffin for the Liontrust offer.

The GAM Board acknowledged the importance of GAM shareholders determining a change in the Board composition, adding that “the constructive and productive discussions are ongoing and are expected to conclude shortly.”

David Jacob, Chairman of GAM Holding AG, commented, “The GAM Board acknowledges that the majority of our shareholders have not found the Liontrust Offer compelling. I am pleased that we have entered constructive and productive discussions with Newgame and that these discussions continue at speed.”

So there is now no chance of the GAM Star Cat Bond Fund becoming Liontrust branded and it seems more likely the GAM brand may persist, if the NewGAMe investor group, its backers and the GAM Board can reach agreement on the way forwards.

At the end of the first-half of 2023, the Fermat Capital Management managed GAM Star Cat Bond Fund was the largest UCITS strategy at $2.85 billion.

Fermat manages other cat bond and ILS fund strategies under the GAM brand as well, which as we reported yesterday sees the specialist ILS manager contributing around CHF 5 billion, or some 21% of assets and an equivalent percentage of revenues to GAM, demonstrating the key relationship that has been created between the pair.