Revelations of a potential merger between leading fund manager L1 Capital (ASX: L1HI) and Platinum Asset Management (ASX: PTM) – which could create an investment business with $18 billion in funds under management – saw the latter’s share price jump 10% at the open to $0.630.
However, an hour after the open there was barely any trading activity in L1 Capital.
While Platinum announced merger plans on the ASX minutes after the market opened, L1 Capital appears yet to do so.
While Platinum is still only in early-stage talks with L1 Capital, any future merger will see Platinum acquire L1 Capital in return for the issue of new ordinary Platinum shares.
Once completed, the merger – which involves L1 covering 114.9 million shares ($89.1 million) owned by Platinum co-founder Kerr Neilson - L1 Capital shareholders will own an estimated 75% of shares in Platinum and existing Platinum shareholders will own the remainder.
Shareholders in the merged entity are expected to benefit from greater scale and diversity of investment strategies and distribution channels, plus access to meaningful cost efficiencies.
Within this morning’s ASX update, Platinum said: “The merger has the potential to deliver material earnings and value accretion for Platinum shareholders over the near term.”
Meanwhile, commenting via the company’s website, L1 Capital co-founders Mark Landau and Raphael Lamm disclosed a 9.6% stake in Platinum – around half Neilson’s 21% stake – for $30 million.
Neilson has also given L1 Capital a call option over part of his remaining shareholding. This option would be exercised in the event of a competing proposal for Platinum.
If this is exercised, L1 Capital will have 19.9% stake.
“We expect the combined business to benefit from improved resourcing and capabilities across investments, client service and operations, as well as increased diversification across investment strategies and distribution channels,” the co-founder said.
Meanwhile, there’s growing speculation that L1’s purchase of Neilson’s holdings could ignite interest in rival investment managers putting their own merger proposals or buyout offers on the table.
The $610 million bid that Regal Partners (ASX: RPL) made last year for Platinum was quickly dismissed as being too cheap.
While Platinum – which manages about $11 billion - has been one of the pioneers of global equities investing since the 1990s, Neilson’s disapproval of the company’s management has been public knowledge for some time.
Neilsen’s disapproval was instrumental in Platinum receiving a second shareholder strike in early November.
With Nielsen’s shareholding now removed from the company’s register, potential suitors may conclude that there’s never been a better time to staunch client outflows and poor performance.
Platinum’s market cap is $368 million; the share price is down 41% in one year and up 14% in the last month.
According to multiple indicators, the stock's shares are in a long-term bearish trend.
Consensus is Moderate Sell.
L1 Long Short Fund’s (ASX: LSF) market cap is $1.7 billion making it an ASX300 stock. The share price is down 5% over one year, and up 6.4% over the last week.
The stock appears weak with little demand.
Consensus does not cover this stock.
This article does not constitute financial or product advice. You should consider independent advice before making financial decisions.
