Playing PAC-man getting more expensive for GQG

afr.com:

As the deadline for binding bids for Pacific Current Group draws closer, one question has risen to the surface: does a PAC-GQG tie-up still make sense financially?

Former Pacific Current boss Tim Carver now runs GQG Partners.  AFR

When Florida-based GQG Partners first lobbed a bid for the boutique fund manager backer in late July, countering Regal Partner’s $586 million offer, its shares were trading around $1.65. Now, GQG is trading at 1.36, down 17.6 per cent.

Strategically, nothing has changed about PAC and GQG boss Tim Carver has been out talking up a deal’s strategic merits. But, the deal is a lot more expensive for GQG as it would have to issue more scrip to pay for PAC, either by issuing more GQG shares to PAC investors (if it’s a scrip-based offer) or selling more shares to come up with the cash.

GQG gave no assurances the transition would proceed when it announced its intention to submit a non-binding indicative proposal, nor did it reveal its terms. PAC owns stakes in 15 boutique asset managers or placement agents and has a market cap of $522 million.

With its pristine balance sheet, GQG could issue debt to fund a deal but listed fund managers and debt are typically not a great mix (just ask Perpetual).

Regal yanked its bid last week saying it had been “consistently disappointed with the engagement” with the target board since its initial approach in March. Its shares haven’t been doing much better, down 36.6 per cent this year and 13.7 per cent since it launched its July 26 bid with River Capital.

Several parties are understood to be in the UBS-led data room though no other listed groups have put up their hands. None have the connections to PAC like GQG. They are two peas in a pod.

Binding bids are due before