Platinum Asset Management has announced it is in discussions with a global alternatives fund manager regarding a possible merger.
Platinum is understood to be in early-stage talks with L1 Capital, a global investment manager that runs a range of long-short and international equity funds.
If the merger proceeds, it will create a manager with combined $18 billion in funds under management.
The potential merger would be enacted via Platinum acquiring L1 Capital in return for the issue of new ordinary Platinum shares. Following completion, L1 Capital shareholders would own around 75 per cent of shares in Platinum and existing Platinum shareholders would own 25 per cent.
The ratio accounts for the combined entity receiving participation in performance fees relating to the first 5 per cent of absolute returns (gross performance net of management fees) generated by L1 Long Short Fund, with any excess performance fees above 5 per cent distributed to existing L1 Capital shareholders.
In an ASX statement, Platinum said: “If the potential merger proceeds, the combined shareholders are expected to benefit from greater scale and diversity of investment strategies and distribution channels, as well as access to meaningful cost efficiencies. The merger has the potential to deliver material earnings and value accretion for Platinum shareholders over the near term.
“The discussions are still at a preliminary stage, and there is no guarantee that any transaction will eventuate from the discussions.”
Commenting in its own separate statement, L1 Capital co-founders Mark Landau and Raphael Lamm said: “We believe a potential merger with Platinum represents a compelling value proposition for Platinum shareholders and has the potential to deliver material earnings and value accretion for shareholders.
“L1 Capital brings a strong investment track record and a loyal, diverse and growing investor base. This has allowed L1 Capital to grow profitably over many years and successfully launch new funds and strategies.
“Platinum has been one of the pioneers of global equities investing since the 1990’s, with a strong brand and diverse client base. 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.”
Separately, L1 Capital has taken a 9.6 per cent stake in Platinum from founder Kerr Neilson. Neilson has also granted a call option to L1 Capital over part of his remaining shareholding that would be exercised in the event of a competing proposal for Platinum. If this is exercised, it will give L1 Capital a 19.9 per cent stake.
Entry into a binding transaction remains subject to a number of conditions, including due diligence and board approval.
