The Magellan Financial Group Ltd (ASX: MFG) share price has risen 25% since news of its proposed merger with Barrenjoey broke.
Magellan announced the deal last Monday, and by the end of the week, one of Australia’s wealthiest families had taken a 5.1% stake.
Any investor who holds a 5% stake or more is considered a ‘substantial holder’, and their purchase must be formally disclosed to the ASX.
According to the ASX lodgement, the Lowy family purchased 9.35 million Magellan shares through a trust on Friday.
The Lowy family paid just over $79 million for their Magellan shares.
That shakes out to an average $8.45 per share, which was the offer price in the $130 million institutional capital raise completed last week.
The Lowy family has confirmed their participation, with Steven Lowy describing Magellan post-merger as ‘a sound long-term investment’.
Who is the Lowy family?
The Lowy family is best known for founding the global shopping centre corporation, Westfield.
Bilionaire Frank Lowy built the business up to become one of the world’s largest retail empires.
Frank Lowy’s son, Steven Lowy, is a principal of the family’s private investment business, Oryxium, and its family office.
Steven Lowy told the Australian Financial Review (AFR) that the family had a long history as a Magellan investor.
Steven Lowy said:
We also have long-standing relationships with the senior team at Barrenjoey and have followed their progress since its establishment.
We have taken the opportunity to become a cornerstone shareholder in MFG with immediate effect through the placement this week, as we believe the merged entity would be a sound long-term investment.
What’s the latest news about the merger?
Magellan has set a date for the shareholders’ vote on the Barrenjoey merger.
It will take place at an extraordinary general meeting on Friday, 10 April.
Following the institutional capital raise, Magellan will now conduct a $20 million Share Purchase Plan (SPP) for ordinary investors.
The SPP will open on Thursday, with SPP booklets to be dispatched to retail investors tomorrow.
Shareholders can apply for a maximum of $30,000 worth of new Magellan shares at the same offer price of $8.45.
The SPP will close at 5pm (Sydney time) on Wednesday, 25 March.
In a letter to shareholders attached to the EGM notice, Magellan chair Andrew Formica said:
As a founding investor, MFG has participated in the strong growth of Barrenjoey over its first five years.
This Merger sets the foundation for future growth and enhanced MFG economic participation.
History between Magellan and Barrenjoey
Magellan gave Barrenjoey $150 million in seed capital before its launch in 2020, and currently owns a 36% stake.
The boutique investment bank is the brainchild of co-executive chairs Matthew Grounds and Guy Fowler OAM.
Grounds and Fowler sensationally left global investment bank UBS to start up Barrenjoey.
Barrenjoey’s current and founding CEO, Brian Benari, was previously CEO of Challenger Ltd (ASX: CGF) for seven years.
The Magellan board unanimously recommends that investors vote in favour of the merger and the issue of new shares to pay for it.
Magellan expects to complete the merger in 4Q FY26.
Magellan share price snapshot
The Magellan share price is $10.48, down 2.3% on Tuesday.
The Magellan share price has been on struggle street since 2021.
That was the year Magellan lost the St James Place mandate, worth about 12% of its revenue at the time, as well as its co-founder and chief stock-picker, Hamish Douglass, who resigned for health reasons.
Magellan’s funds under management have fallen from $113 billion in July 2021 to $40 billion today.
In July 2021, the Magellan share price was about $50.
Over five years, the Magellan share price has crumbled by 73%.
The post Lowy family buys into Magellan after merger news pushes share price 25% higher appeared first on The Motley Fool Australia.
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Motley Fool contributor Bronwyn Allen has positions in Magellan Financial Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Challenger. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.