In the tug-of-war over GAM, Liontrust and the shareholder group NewGAMe remain irreconcilably opposed. Can there still be a winner?

GAM's half-year figures, published yesterday revealed its plight. Assets under management (AuM) fell 9.3 percent to 68.0 billion Swiss francs over the first six months of the year, mainly due to outflows. Impairments and an operating loss resulted in a total net loss of 71.2 million Swiss francs.

The company's CEO, David Jacob, said the results show the challenges GAM is facing, and why he once again said the board strongly recommends that GAM shareholders accept Liontrust's offer.

Courting Trust

The importance of trust in the relationship between a financial institution and its clients was impressively demonstrated most recently by Credit Suisse. But the trust of shareholders shouldn't be underestimated either.

This relationship has been under severe strain for some time now as seen by the tug-of-war between Liontrust and the NewGAMe shareholder group around French billionaire Xavier Niel. There's no end in sight, or strong indication as to who will ultimately walk away the winner.

What Will Be Left?

The question is, above all, what will be left in the end? It's clear, the longer the dispute continues, the greater the strain on the business, and Liontrust by extending the bid deadline several times doesn't exactly boost confidence. Liontrust is offering 0.0589 of its shares for each GAM share, valuing the company at a mere 107 million francs.

The shareholders gathered under NewGAMe hold 9.6 percent of GAM. According to the Liontrust offer, this would correspond to an arithmetical value of around 10.4 million francs.

The shares currently have a market value of 0.53 francs, about half of what they were a year ago. When NewGAMe and Swiss asset manager Bruellan announced their entry into GAM at the end of April, it caused a short-term price bounce from around 50 to around 90 centimes. But is that just a dead cat bounce?

Ambitious Goals

The turnaround plans of the new investors were thwarted just a few days later by the Liontrust offer at the beginning of May. Since then, the dispute between the camps has steadily intensified.

The reform plans of NewGAMe don't seem to excite the shareholders in a deal where financing is to be secured via a convertible valued at 25 million francs. GAM already borrowed 20 million francs from Liontrust with a bridge loan.

That investors don't want to go «all in» should be viewed critically. The counter-offer to the London-based asset manager only provides for the purchase of around 17.5 percent of the shares for 0.55 francs each costing 15.4 million francs, something that lacks conviction on its face.

Showdown at the EGM

NewGAMe will have the opportunity to present its plans to the shareholders at an extraordinary general meeting (EGM) on August 18. This includes the removal of the current Board of Directors and the election of a new one.

Whatever the shareholders decide at the EGM and until the end of the currently valid offer period for the Liontrust exchange offer on August 2, the squabbles and the loss of time have further weakened GAM's position.

If this is what winning looks like, losing will look ugly.