Troubled investment manager Magellan has sold its stake in Mexican restaurant chain Guzman y Gomez to a group of high net worth individuals, as part of a plan to refocus on its core asset management business.
Magellan on Monday announced it had reached an agreement to sell its 11.6 per cent stake in Guzman y Gomez for around $140 million to trust fund, which represents a 36.3 per cent premium on its entry price in January 2021.
Magellan chair Hamish McLennan said the deal was an “excellent outcome for Magellan shareholders”.
“[Guzman y Gomez] is an outstanding company, however, the sale of our shareholding is consistent with our strategy to focus on our core funds management business,” he said.
The investment was long-touted by Magellan’s chief investment officer Hamish Douglass as having enormous growth potential. It was managed by Barrenjoey Capital Partners, Magellan’s investment bank offshoot launched in 2020.
Guzman y Gomez delayed plans to list on the ASX last March after Douglass invested $86.8 million in the company, a significant stake which enabled the chain to refit its restaurants.
“He called us up and he said ‘I love you, and I’ve got to get involved’,” Guzman y Gomez chief executive Steven Marks said of a phone call from Douglass.
However, investors punished Magellan last year after Magellan Capital Partners reported a loss of $41.8 million, driven by losses in key stakes including Guzman and Gomez.
At the time, Douglass defended the assets, predicting the businesses would show profitability over the next three to five years. “You’re going to look back and say they were smart investments,” he said at the time.
Magellan said the sale of Guzman was arranged by Barrenjoey Capital Partners, and McLennan reaffirmed commitment to supporting the business.
“The outcome we have achieved with this transaction reinforces the strength of our partnership with Barrenjoey. We remain committed to the long-term success of Barrenjoey as a major shareholder,” McLennan said.
Douglass has been on sick leave since February, after a leadership crisis sent the company into turmoil. Magellan’s funds under management and share price have since been in freefall, with latest figures showing the company manages $68.6 billion – down from highs of $113.9 billion mid-last year.
After stepping up as chair in February, McLennan announced Magellan would make no new investments in Magellan Capital Partners and would instead focus on improving asset management, retaining staff, lifting governance and engaging with customers.
Magellan’s asset management business has suffered perpetual outflows, caused by the relative under-performance of its flagship global equities fund. Many institutional clients had investment mandates that specified Douglass remain in the role but there remains no timeframe for when he will return.