Platinum mulls L1 Capital merger

Platinum Asset Management is currently in discussions with L1 Capital to combine forces, a move that would create an $18 billion investment manager.

Platinum Asset Management is considering merging with L1 Capital, confirming via the ASX it is discussing the possibility with the latter's shareholders.

The announcement follows L1 Capital buying a substantial interest in Platinum, acquiring a 9.6% share from Platinum founder Kerr Neilson. Neilson also granted the firm a call option over part of his remaining interest which can only be exercised if a competing proposal for Platinum arises. If exercised, L1 Capital's share in Platinum would effectively rise to 19.9%.

As it stands, Platinum would acquire L1 Capital and in return L1 Capital's shareholders would own 75% of Platinum's shares, with existing shareholders owning the balance. Platinum explained that this accounts for the combined entity receiving participation in performance fees related to the first 5% of absolute returns from the L1 Long Short funds.

If the two were to combine, it would offer enhanced scale and diversity of investment strategies and distribution channels, Platinum noted. It would also deliver material earnings and value accretion for shareholders, it added.

"L1 Capital is a first-class manager with a strong investment track record. The potential merger provides an attractive opportunity to combine expertise and resources, and we will continue to explore if it's in the best interests of Platinum shareholders," Platinum chief executive Jeff Peters said.

Meantime, L1 Capital co-founders Mark Landau and Raphael Lamm said they believe a merger is a compelling proposition for Platinum shareholders.

"Platinum has been one of the pioneers of global equities investing since the 1990's, with a strong brand and diverse client base," they said.

"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."

Regardless of the merger talks' outcome, Platinum said it looks forward to working closely with L1 Capital as a major shareholder.