An investor group controlling just over eight percent of GAM's share capital is not satisfied with the offer from Liontrust. The deal undervalues the Swiss asset manager and it is considering rejecting the deal.

NewGAMe and Bruellan, an investor group controlling about 8.3 percent of GAM said yesterday's offer by Liontrust to acquire all of GAM's share capital «undervalues GAM and does not reflect the significant upside that a successful turnaround could generate for GAM's current shareholders,» according to a statement from Newgam on Friday. 

Another red flag for the investor group is that Liontrust is only offering its shares and not making any cash offer. The implication is that GAM shareholders will be at the mercy of the volatility of Liontrust shares «without any firm price for a business that has significant intrinsic value,» Newgame said.

Rejecting the Offer

Given that, «The investor group is therefore contemplating not to accept Liontrust's offer under the current terms.»

The statement went on to say that because it is a qualified shareholder of GAM, it is reviewing the decision and will consider whether it will mount a legal challenge. The group also noted that an April 21 decision by the Swiss Takeover Board announced yesterday said the decision allows Liontrust to make the offer contingent upon GAM's successful exit from its fund management business in Switzerland and Luxembourg.

When the investor group took the stake in GAM, it was against a sale and said «We are convinced there is an opportunity to unlock significant value at GAM if the company can complete a successful turnaround and prioritize higher value-added activities in a more efficient corporate structure.» 

Movie Rerun

We have recently seen a similar version of this movie. 

As UBS was in discussions about its government-imposed takeover of Credit Suisse in March, it initially offered 25 centimes per share for Credit Suisse which was a fraction of its closing price of 1.86 Swiss francs at the time. Its largest shareholder, the Saudi National Bank which holds just under ten percent of the shares, said the offer was too low for both stock and bondholders and resisted the offer. 

It is too soon to tell if Newgame is using the same playbook, but today's statement could be its opening gambit.