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Troubled Gam may be acquired by a larger group

GAM N (SIX:GAM)  
SIX:GAM   GAM N
GAM Holding AG is a Swiss Investment Manager firm which runs a number of Investment funds.

Just over a year ago GAM Holding AG suspended a manager for not following internal procedures. The repercussions on GAM were enormous. One of their funds, "ARBF", had to be suspended. Most investment advisors removed all GAM funds from their recommended list and GAM suffered huge outflows of funds.

GAMs share price collapsed from over CHF 16 to around CHF 4.00 - a fall of 75%

GAM now seems to have stemmed the outflow of funds. AUM rose quarter on quarter to March 2019. GAM says its priority is to restore confidence and move on from the past incident. The winding up of the ARBF is expected to be completed in mid July 2019.

GAM is exploring all options to maximise value for shareholders. According to some press reports, that includes seeking a merger partner, but does not exclude going it alone.

As a provider of investment funds, GAM is a pretty small player. A larger fund manager could easily absorb GAM, its funds and clients without taking on too much extra resources. Following the collapse in the share price, GAM is trading at a level well below what would be expected based on assets under management alone. Look at the table below.

Recently, three fund managers have taken 3% stakes in GAM. Shroders, Blackrock and Soros. George Soros and his activist funds are opportunists who may be instrumental in engineering a merger.

Have a look at the table below. Notice how GAM's Market capitalisation relative to its assets under management is much lower than the other firms.

Name of Company GAM Holding AG
Currency CHF
AUM (billions) 139
Revenues 2020e (millions) 338
Market Capitalisation (millions) 710


Name of Company Schroders plc
Currency GBP
AUM (billions) 421
Revenues 2020e (millions) 2'071
Market Capitalisation (millions) 6'820


Name of Company Blackrock Inc
Currency USD
AUM (billions) 6'520
Revenues 2020e (millions) 16'900
Market Capitalisation (millions) 70'811

As for GAM's share price, the low point seems to be well behind us. It took quite a leap on the announcement of the Soros stake in May 2019, and has maintained the higher levels since then. It may be a long road to recover, but the kicker could be a bid.
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