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Struggling investment manager Magellan has sold its stake in Mexican restaurant chain Guzman y Gomez to a group of high net worth individuals, as part of a plan to refocus on its core asset management business.
Magellan announced on Monday that it had reached an agreement to sell its 11.6% stake in Guzman y Gomez for around $140 million to a trust fund, representing a 36.3% premium to its January entry price. 2021.
Magellan Chairman Hamish McLennan said the deal was “a great outcome for Magellan shareholders.”
“[Guzman y Gomez] is an outstanding company, however, selling our stake is in line with our strategy to focus on our core fund management business,” he said.
The investment has long been touted by Magellan chief investment officer Hamish Douglass as having huge growth potential. It was managed by Barrenjoey Capital Partners, Magellan’s investment banking subsidiary launched in 2020.
Guzman y Gomez delayed plans to list on the ASX last March after Douglass invested $86.8 million in the company, a significant stake that allowed the chain to revamp its restaurants.
“He called us and he said ‘I love you and I have to get involved,'” Guzman y Gomez general manager Steven Marks said of a phone call from Douglass.
However, investors punished Magellan last year after Magellan Capital Partners reported a loss of $41.8 million, driven by losses in key holdings including Guzman and Gomez.
At the time, Douglass defended the assets, predicting the companies would show profitability over the next three to five years. “You’re going to look back and say these were smart investments,” he said at the time.
Magellan said the sale of Guzman was arranged by Barrenjoey Capital Partners, and McLennan reaffirmed his commitment to supporting the company.
“The outcome we have achieved with this transaction reinforces the strength of our partnership with Barrenjoey. We remain committed to Barrenjoey’s long-term success as a major shareholder,” McLennan said.
Douglass has been on sick leave since February after a leadership crisis threw the company into turmoil. Magellan’s funds under management and share price have since plummeted, with the latest figures showing the company under management at $68.6 billion, down from mid-year highs of $113.9 billion. last.
After taking over as chairman in February, McLennan announced that Magellan would make no new investments in Magellan Capital Partners and would instead focus on improving asset management, employee retention, improving governance and engagement with customers.
Magellan’s asset management business suffered from perpetual outflows, caused by the relative underperformance of its flagship global equity fund. Many institutional clients had investment mandates that specified that Douglass remained in the role, but there is no timeline for his return.