Search ASX code:
Generic filters

Search ASX code:
Generic filters

Search ASX code:
Generic filters

Search ASX code:
Generic filters

Will the Magellan (ASX:MFG) share price rise after its new big investment?

Magellan Financial Group Ltd (ASX: MFG) has announced a new investment, will the share price rise in reaction?

What happened?

Magellan announced that it has entered into an agreement to buy a 10% holding of Guzman y Gomez.

The investment business explained that Guzman y Gomez is an Australian based quick service restaurant chain that makes Mexican food, with 147 stores across Australia, Singapore, Japan and the US.

Magellan will buy the 10% stake for $86.8 million in cash, subject to Guzman y Gomez shareholder approval in January 2021. The investment will form part of Magellan’s Principal Investments business. New investment bank Barrenjoey is another investment in this segment. Magellan’s Head of Governance & Advisory, Craig Wright, will be appointed as a non-executive director of Guzman y Gomez to oversee the investment. However, Magellan will have no day-to-day involvement in the business.

Guzman y Gomez is managed by a team led by the founder and CEO, Steven Marks. The management team is supported by a highly experienced board, including Chairman Guy Russo who used to be the CEO of McDonalds Australia and Kmart Group.

Management comments

Magellan Chairman Hamish Douglass said: “We are extremely pleased to become a shareholder in Guzman y Gomez. Magellan has deep investment experience in the quick service restaurant industry and we believe Magellan can both add and gain considerable insights as a major investor and supportive shareholder. Guzman y Gomez is a world class business with enormous growth potential and represents a highly attractive investment opportunity for our Principal Investments business.”

The Guzman y Gomez founder and CEO, Steven Marks, hinted at the plans for the business: “Our ambition is to be the best restaurant company in the world and, to achieve that, we need the support of the best partners and strongest board. Magellan’s global experience and track record in the QSR space is truly world class and we could not think of a better qualified or more aligned partner to have alongside us as we enter the next, most exciting phase of the Guzman y Gomez journey.”

Summary thoughts

This is a very interesting move by Magellan. Normally you’d expect one (or more) of its funds to do the investing, rather than the parent business. But I’m sure Magellan has done the research and concluded that Guzman y Gomez has a very good future.

Is Magellan trying to turn into a business that operates like Berkshire Hathaway and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)?  It certainly increases its potential growth if it’s making direct investments in operating businesses.

Looking at other ASX growth shares in the space that are interesting to me, fund manager Australian Ethical Investment Limited (ASX: AEF) could be one to watch.

The Rask analyst team has launched its most ambitious investing mission of all time...

Find (and buy) Australia's 10 best small-cap shares.

Our analysts have identified 10 ASX shares that could potentially return multiples of the initial investment over the next 10 years. But make no mistake, this mission isn't for the feint of heart. It's a high-risk mission for serious investors only.

The Rask Rockets program is our most advanced, most highly valued ASX investor research service.

And guess what, we've given away 1 free Rask Rocket Beyond share idea, plus one of our best Rask Rockets Apollo mission companies and another one of our top stock ideas from Rask Invest -- all FREE! You can get the stock ideas by listening to a recent episode of Australian Investors Podcast, as part of our Beyond re-opening sale.

Just click here to get the names and ASX stock ticker codes of 3 of our team's best stock ideas.
At the time of publishing, Jaz owns shares of WHSP.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

LIVE ASX Chat - Join in!

Play Video

Keep reading: