8 Nov 2010
It’s been a whirlwind year for Gartmore. First, the investment manager floated on the London Stock Exchange in December 2009. Its shares weakened and then plunged in the spring when Guillaume Rambourg left the firm owing to unauthorised directing of trades to brokers. Now Roger Guy, the man termed the franchise by hedge fund rivals, is to retire in May 2011. And he is being followed out the door by Darrell O’Dea, who only joined Gartmore after Rambourg departed, and Dominic Rossi, the chief investment officer, who is joining Fidelity.
Unsurprisingly, Gartmore’s stock has taken a renewed drubbing as up to one-third of the free float investors sold up on Monday. But the stock price, down around 15%, managed to rally from a low of 98p after Guy’s bombshell hit to close at 107p. It implies that, for now, investors are putting some currency into the possibility that a rival fund manager or financial institution will be attracted to bid for Gartmore. Indeed, it is a logical response to the appointment of Goldman Sachs to conduct a strategic review, a move that puts a ‘for sale’ sign over the fund manager.
What’s more, the flow of M&A among asset managers has certainly picked up. Man Group has just completed its $1.5 billion acquisition of equities specialist GLG Partners. And in October, Royal Bank of Canada surprised onlookers with a premium fixing $1.5 billion knock-out bid for fixed income specialist BlueBay Asset Management. In fact, it is understood that when Man began to canvass options for expanding into equities it ran the slide rule over Gartmore – a move that was rebuffed – before fixing its sights on GLG.
Despite a string of bad luck, Gartmore offers an interesting opportunity. To begin with, it is managing around £21 billion with about 80% of this in equities. It has strong offerings in European equities as well as in UK, global and emerging market equities. It also has valuable distribution channels to investors throughout Europe and into Asia.
Though Guy’s departure next year won’t be popular with investors, Gartmore has a number of proven performers stepping up, notably GAM veteran John Bennett (who will lead a unified European equities team) and strong performing UK hedge fund manager Ben Wallace. Given the opportunity through the new equity issue also announced Monday, Gartmore has the fire power to go shopping for new portfolio management teams if it feels the need to do so.
Perhaps the key issue is what Hellman & Freeman want for their remaining 24% stake. Other big shareholders that will also have a say include Henderson with a 6.7% stake, Guy himself with 5.4%, and other institutional investors including UBS, Aegon and Sageview Capital. CEO Jeff Meyer, who says it is too early to know where Gartmore will find itself after the strategic review, is also among the top 10 shareholders.
Given the rarity value of established fund managers that can be acquired relatively cleanly Gartmore is likely to attract a range of suitors. The betting must be that a take-over price will be someway between the current share level but well discounted from the 220p float price of 11 months ago. It will be of high interest to see how many foreign groups emerge to take a look at an established European equities performer. But it is the action of investors in the group’s funds in the next few months that will seal Gartmore’s fate, determining whether it can remain independent or gets sold to the highest bidder.
Unsurprisingly, Gartmore’s stock has taken a renewed drubbing as up to one-third of the free float investors sold up on Monday. But the stock price, down around 15%, managed to rally from a low of 98p after Guy’s bombshell hit to close at 107p. It implies that, for now, investors are putting some currency into the possibility that a rival fund manager or financial institution will be attracted to bid for Gartmore. Indeed, it is a logical response to the appointment of Goldman Sachs to conduct a strategic review, a move that puts a ‘for sale’ sign over the fund manager.
What’s more, the flow of M&A among asset managers has certainly picked up. Man Group has just completed its $1.5 billion acquisition of equities specialist GLG Partners. And in October, Royal Bank of Canada surprised onlookers with a premium fixing $1.5 billion knock-out bid for fixed income specialist BlueBay Asset Management. In fact, it is understood that when Man began to canvass options for expanding into equities it ran the slide rule over Gartmore – a move that was rebuffed – before fixing its sights on GLG.
Despite a string of bad luck, Gartmore offers an interesting opportunity. To begin with, it is managing around £21 billion with about 80% of this in equities. It has strong offerings in European equities as well as in UK, global and emerging market equities. It also has valuable distribution channels to investors throughout Europe and into Asia.
Though Guy’s departure next year won’t be popular with investors, Gartmore has a number of proven performers stepping up, notably GAM veteran John Bennett (who will lead a unified European equities team) and strong performing UK hedge fund manager Ben Wallace. Given the opportunity through the new equity issue also announced Monday, Gartmore has the fire power to go shopping for new portfolio management teams if it feels the need to do so.
Perhaps the key issue is what Hellman & Freeman want for their remaining 24% stake. Other big shareholders that will also have a say include Henderson with a 6.7% stake, Guy himself with 5.4%, and other institutional investors including UBS, Aegon and Sageview Capital. CEO Jeff Meyer, who says it is too early to know where Gartmore will find itself after the strategic review, is also among the top 10 shareholders.
Given the rarity value of established fund managers that can be acquired relatively cleanly Gartmore is likely to attract a range of suitors. The betting must be that a take-over price will be someway between the current share level but well discounted from the 220p float price of 11 months ago. It will be of high interest to see how many foreign groups emerge to take a look at an established European equities performer. But it is the action of investors in the group’s funds in the next few months that will seal Gartmore’s fate, determining whether it can remain independent or gets sold to the highest bidder.
