GAM Revives Sale Attempt as Firm Seeks End to Scandal

(Bloomberg) -- Swiss money manager GAM Holding AG is reviving attempts to sell itself, a process that stalled as the firm struggled to contain the fallout from a scandal involving a former bond trader, people with knowledge of the matter said.

The firm has contacted potential buyers and is seeking expressions of interest by early May, the people said, asking not to be identified because the discussions are private. GAM and its advisers have gauged interest from banks, asset managers and insurers including Geneva-based Union Bancaire Privee, French investment bank Natixis SA and buyout firms, the people said.

GAM rose as much as 9.5 percent in Zurich on the news and was trading 8.8 percent higher at 4.39 francs as of 4:19 p.m. The stock climbed by 15 percent on Wednesday after the company said outflows slowed in a sign that the fund manager is stabilizing.

GAM Revives Sale Attempt as Firm Seeks End to Scandal

The troubled firm is working with JPMorgan Chase & Co. and Citigroup Inc. as it explores options, including selling a majority or minority stake, the people said. It remains unclear whether any of the companies will pursue a transaction or if talks will lead to a deal, they said. A management buyout is one option also being considered, one of the people said.

GAM, Citigroup, Natixis, UBP and JPMorgan declined to comment.

The bank started informal talks with potential buyers for all or parts of the business last year, though discussions petered out as the firms focused on stemming outflows because of a crisis of confidence caused by the suspension of former fund manager Tim Haywood. The firm is now seeing the pace of client withdrawals begin to slow and plans to complete the liquidation of the scandal-hit bond fund within the next three months.

Hesitant Bidders

Still, while potential bidders are looking at the firm because it’s become cheap and has some attractive clients and assets, many are hesitant to bid before GAM reverses outflows and finishes the liquidation, according to people speaking to possible acquirers.

Firm-wide assets under management rose by 5.2 billion francs to 137.4 billion francs during the first three months of the year, after shrinking by more than 26.5 billion francs in 2018, the worst drop in a decade. GAM was forced to liquidate more than $7 billion across nine funds after suspending Haywood in late July amid allegations of shortfalls in documenting trades and managing risk.

The bulk of client withdrawals so far have come in investment management, the company’s principal revenue driver. Clients pulled the most money -- about 5.4 billion francs over 2018 -- from fixed-income funds that include GAM Star Credit Opportunities and GAM Local Emerging Bond.

©2019 Bloomberg L.P.