By Scott Murdoch and Rajasik Mukherjee
SYDNEY, May 1 (Reuters) - Australian fund manager Platinum Asset Management PTM.AX said on Thursday it was in talks with investment manager L1 Capital on a deal to create an A$18 billion ($12 billion) funds management group.
While the financial terms were not announced, Platinum said it would buy L1 and would issue its own stock to L1's owners. L1 said if the transaction proceeded it would hold about 75% of the combined entity. Platinum investors would own the remainder.
The talks with L1 follow Platinum's rejection last year of a buyout bid from local hedge fund Regal Partners RPL.AX, which valued Platinum at about A$616.5 million.
Platinum shares rose as much as 15.8% on Thursday, to a two-month high, outpacing the S&P/ASX200 .ASXJO which was up 0.2%. The stock has slumped 57% over the past two years amid an exodus of investors from Platinum's underperforming funds.
Its market capitalisation now stands at A$330.7 million. Its funds under management have dropped from A$18.6 billion as of March 31, 2023, to A$10.3 billion at the end of March this year.
L1 is owned by the firm's senior staff, including founders Raphael Lamm and Mark Landau, but has a number of funds listed on the ASX.
"If the potential merger proceeds, the combined shareholders are expected to benefit from greater scale and diversity of investment strategies and distribution channels," said Platinum in its statement, adding that the merger would bode well for its shareholders in the near term.
The deal is contingent on due diligence from both companies being carried out and final board approvals, the firms said.
Platinum, headquartered in Sydney, said L1 has already secured a 9.6% stake in the company from its founder, billionaire investor Kerr Neilson.
He has also granted a call option that would take L1's stake to 19.9%, exercisable if a competing proposal for Platinum emerges, the company added.
($1 = 1.5608 Australian dollars)
(Reporting by Rajasik Mukherjee in Bengaluru and Scott Murdoch in Sydney; Editing by Sonali Paul)
((Rajasik.Mukherjee@thomsonreuters.com;))