The Platinum Asset Management Ltd (ASX: PTM) share price is having a good session on hump day.
In morning trade, the ASX 300 stock is up 7% to 53.5 cents.
This compares favourably to the performance of the ASX 300 index, which is down 0.1% at the time of writing.
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Why is this ASX 300 stock jumping?
Investors have been buying the struggling fund manager's shares after it released an update on its potential merger with L1 Capital, which operates the L1 Long Short Fund Ltd (ASX: LSF).
According to the release, the ASX 300 stock has "constructively progressed" discussions with L1 Capital, and both parties have now substantially completed the due diligence phase of their proposed merger.
In light of this mutual due diligence and related discussions, Platinum notes that an adjustment to the indicative commercial terms previously disclosed has been proposed.
It is now contemplated that immediately following completion of the potential merger, L1 Capital shareholders will own 74% of the shares in Platinum and existing Platinum shareholders will own 26% of the shares in Platinum. This compares to 75% and 25%, respectively, previously.
In addition, the release notes that the combined entity would receive participation in performance fees relating to the first 3% of absolute returns (gross performance net of management fees) generated by the L1 Long Short funds with any excess performance fees on returns above 3% in LSF distributed to existing L1 Capital shareholders.
What's next?
Momentum is building for the merger and the two parties are now seeking to finalise negotiations of the Merger Implementation Deed (MID). This will set out the full terms of the potential merger.
The ASX 300 stock continues to believe that the merger would be a good move for its shareholders. It said:
Platinum remains of the view that the combination with L1 Capital would deliver value for Platinum shareholders. Any transaction remains subject to final Platinum Board approval and an assessment of the best interests of Platinum shareholders. If binding transaction documents are entered into, the Potential Merger will also be subject to the approval of Platinum's shareholders and relevant regulatory approvals.
Though, it warns that there is no guarantee that any transaction will eventuate from discussions between the parties.
Despite today's jump, the Platinum share price is down approximately 50% since this time last year and 85% over the past five years. Clearly a change is needed and shareholders will no doubt be hoping that this will be it.
