Magellan has announced the sale of its 11.6 per cent interest in Guzman y Gomez to a Barrenjoey Capital Partners entity for a cash consideration of $140 million.
Magellan said in an ASX listing on Monday, it is selling the stake with the intention of seeding an investment trust comprising high-net-worth investors for cash consideration of $140 million.
“GYG is an outstanding company, however, the sale of our shareholding is consistent with our strategy to focus on our core funds management business,” said Magellan’s chairman Hamish McLennan.
“The upfront sale price represents a 36.3 per cent premium to our entry price in January 2021. We believe the sale is an excellent outcome for Magellan shareholders,” Mr McLennan continued.
The firm may also be entitled to a further payment of up to $6 million subject to the performance of GYG and the realisation of the investment by the trust.
Magellan expects to record a pre-tax profit on the sale of $34 million in FY22.
“Magellan is pleased with the performance of its Magellan Capital Partners investments. The outcome we have achieved with this transaction reinforces the strength of our partnership with Barrenjoey. We remain committed to the long-term success of Barrenjoey as a major shareholder,” Mr McLennan said.
Completion of the transaction is expected to take place in two tranches occurring in June and July 2022.
Following the ASX announcement, Magellan’s share price dipped 7.5 per cent.
Late last week, the firm Magellan reported a slight decrease in funds under management (FUM), following a dip in global equities.
Magellan reported FUM of $68.6 billion at the end of April, down slightly from $70 billion a month earlier.
Retail FUM, which is becoming increasingly crucial for the business, dipped to $24.8 billion on 29 April from $25.7 billion on 31 March. Institutional FUM followed the downward trend, dropping $0.5 billion to $43.8 billion.
Magellan has had a tumultuous year after in February it was announced that chief investment officer Hamish Douglass would be taking an indefinite leave of absence on medical grounds. Just months earlier, Magellan suffered a hefty setback when St James’s Place withdrew its mandate worth $24 billion in FUM.
Magellan’s has since shifted its focus to strengthening governance and accountability across the business.
