Magellan Financial is understood to have held recent talks with investment banks around the market as part of a consideration to bring in a new financial adviser to assist it in weighing future options.
It is understood that advisers around the market were spoken to by Magellan’s board about a month ago to offer advice on the future direction of the business.
Sources say that the appointment was to assist the board with “an idea” for the company, but one source close to the company had said that nothing had progressed.
Magellan was once hailed as the great success of star stock picker and co-founder Hamish Douglass.
But turmoil began for Magellan in 2021 as the sudden departure of chief executive Brett Cairns threw the spotlight on executive chairman Hamish Douglass and the split from his wife.
The company then lost a key mandate from its major client St James’s Place, responsible for about 12 per cent of revenue and causing its shares to crash from about $29 to $19 following the announcement, and has lost other mandates since.
Compounding its challenges have been the weak macro-economic conditions.
Mr Douglass has since left the company’s board and is now counted as a consultant, while Magellan told the market this week that co-founder, former UBS Australia boss Chris Mackay, would no longer run the global equities strategy.
On Monday, Magellan chief executive David George said he would take on the role of chief investment officer with Gerald Stack, portfolio manager of the Magellan Infrastructure Fund, to become deputy CIO.
A raft of staff departures have also happened in recent days.
Magellan is a 40 per cent shareholder of investment banking start up Barrenjoey, and some in the market questioned whether the move to gain independent advice could suggest that the Australian fund manager could be contemplating a potential exit.
Recently, Magellan offloaded its 11.6 per cent investment in Mexican fast food chain Guzman y Gomez this year to the Magellan-backed Barrenjoey for up to $146m after buying the interest in 2020 for $86.8m.
Both investments under Mr Douglass’ watch were heavily criticised by investors.
The most logical buyer of Barrenjoey would be its other minority shareholder, British bank Barclays, although sources believe it would not be an eager acquirer of more stock, particularly heading into a weaker macro-economic environment.
Sources say that investment banks have sounded out Magellan’s rivals about their interest in an acquisition, but most believe there would be no takers.
Magellan’s share price has fallen dramatically since 2020 when it was worth more than $70 before the company’s fallout.
Shares on Thursday closed at $10.30, with Magellan’s market value at $1.98bn.
Magellan owned a 40 per cent of Barrenjoey at its launch, contributing about $90m of cash and about 1.2 million Magellan shares which in September 2020 would have been worth about $66m.
Those shares now carry a value of about $12.4m.
The remaining 50 per cent is owned by the staff.
British bank Barclays bought a 10 per cent, but increased its stake to 18.2 per cent in May, subscribing to $75m of new capital.
Despite Magellan’s woes, there is a theory that Magellan’s share price has bottomed because it has a highly defensive portfolio that will perform more strongly in a weaker economic environment.
At Magellan’s annual general meeting on Thursday, Mr George said he is confident he can restore the reputation of his firm after it lost $50bn in funds under management amid controversy and key personnel changes.
Barrenjoey was started by high profile UBS rainmakers such as Matthew Grounds and Guy Fowler.
It has been in the spotlight over the past year as its competitors question whether it can cover its costs from hiring top talent in the market, even after winning an impressive list of mandates.
Mr Grounds and Mr Fowler are known to have had a close, longstanding relationship with both Mr Douglass and Mr Mackay.
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