Magellan Financial Group Ltd (ASX:MFG) shares rose 0.5% after chairman Andrew Formica urged shareholders to support the group’s proposed merger with investment bank Barrenjoey, ahead of a vote scheduled for next month. The move came as the Lowy family emerged as a new cornerstone investor, taking a 5.1% stake in Magellan.
In a message to shareholders, Formica backed the transaction and encouraged investors to approve the tie-up. The Lowy Family said it had a long association with Magellan, having previously been both a shareholder and an investor in the company’s funds.
Steven Lowy said the family also had established relationships with Barrenjoey’s senior leadership and had tracked the firm’s development since it launched. He said the family had taken the opportunity to become a cornerstone shareholder in Magellan “with immediate effect” through this week’s placement, adding that it viewed the combined group as an attractive long-term investment.
Magellan announced earlier in the week that it plans to merge with Barrenjoey in a deal that values the investment bank at $1.6 billion. Before the merger was unveiled, Magellan already held a 36.4% stake in Barrenjoey.
The transaction includes a $130 million placement to Magellan’s institutional shareholders and a $20 million share purchase plan for existing retail shareholders, priced at $8.46 per share.
Once the merger is completed, Barrenjoey and Barclays are expected to hold 31.7% and 4.9% respectively in the enlarged Magellan. The remaining 63.5% will be held by Magellan’s existing shareholders.