Immediately after the news of the deal was announced, shares in Liontrust were trading 3.39% higher on the AIM index at 358.6p. However by late afternoon the shares had fallen back to be down 0.84% at 344.09p.
The transaction, which Liontrust called “highly complementary” to its business, will cost around £30m, comprising £17m in new ordinary shares, up to £3m in cash, and up to £10m for the net asset value of Alliance Trust (ATI) at the time of deal completion.
The additional ATI assets will expand Liontrust’s total AUM by approximately 43%, following a year of rapid growth.
Over the first half of the year, Liontrust’s AUM shot up by 29.5%, taking its total to £5.7bn at 30 September 2016. By mid-November, however, its AUM count was down by £100m.
The acquisition includes the ATI fund management team fronted by former Aviva man Peter Michaelis, who will carry on managing sub-funds from the AT Sustainable Future line, including the UK and global growth funds, as well as the corporate bond and cautious managed vehicles in the series.
Michaelis’ resources will also help give Liontrust a leg-up in the sustainable investment space.
“There is strong demand for sustainable investment in the UK and internationally,” said Liontrust chief executive John Ions.
“Increasingly, consumers expect the companies they use to be socially responsible and the demand for sustainable investment will only grow with the rise of millennials.
“The acquisition of ATI puts us in a very strong position to meet this demand. We look forward to promoting the team and the sustainable investment funds in the UK and across continental Europe.”
A sensible deal
Stockbroker Numis called the deal “a sensible, value additive and diversifying acquisition and an important milestone in management’s ambition to grow AuM to £10bn.”
According to Numis’ calculations, the purchase price is around 7.1x pro-forma earnings (8.8x including restructuring costs), which should yield growth in EPS of 7%.
The sale is the culmination of a strategic review conducted by AT’s board over an 18-month period brought on by shareholder concerns over cost, the effectiveness of the trust’s corporate structure and returns.