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Troubled investment manager Magellan has sold his stake in Mexican restaurant chain Guzman y Gomez to a group of high net worth individuals, as part of a plan to refocus on the core asset management business.
Magellan announced Monday that it has reached an agreement to sell its 11.6 percent stake in Guzman y Gomez for $140 million to a trust fund, representing a 36.3 percent premium to its January 2021 entry price.
Magellan’s president, Hamish McLennan, said the deal was an “excellent outcome for Magellan shareholders.”
“[Guzman y Gomez] Is an outstanding company, however, selling our stake is in line with our strategy to focus on our core business of money management.
Hamish Douglas, Magellan’s chief investment officer, has long considered the investment to have huge growth potential. It was managed by Barrenjoey Capital Partners, a subsidiary of Magellan Investment Bank launched in 2020.
Guzman y Gomez postponed plans to list in ASX last March after Douglass invested $86.8 million in the company, a large stake that enabled the chain to revamp its restaurants.
“He called us and said ‘I love you, and I gotta get involved,'” Stephen Marks, CEO of Guzman y Gomez, said of the phone call from Douglas.
However, investors penalized Magellan last year after Magellan Capital Partners reported a $41.8 million loss, driven by losses in major stakes including Guzman and Gomez.
At the time, Douglas defended the assets, predicting that the companies would show profitability over the next three to five years. “You will look back and say they are smart investments,” he said at the time.
Magellan said the Guzman sale was arranged by Barrenjoey Capital Partners, and McLennan reiterated his commitment to supporting the business.
“The result we achieved with this transaction strengthens the strength of our partnership with Barrenjoey. We remain committed to the long-term success of Barrenjoey as a major shareholder,” said McClennan.
Douglas has been on sick leave since February, after a leadership crisis disrupted the company. Magellan’s money under management and stock price have since plummeted, with the latest figures showing the company managing $68.6 billion — down from $113.9 billion in the middle of last year.
After taking over as president in February, McLennan announced that Magellan would not make any new investments in Magellan Capital Partners and would instead focus on improving asset management, employee retention, and raising governance and engagement with clients.
Magellan’s asset management business has suffered from permanent outflows due to the relative underperformance of a leading global equity fund. Several institutional clients had investment mandates that cause the designated Douglas to remain in the position but no time frame for his return.