Ares Management’s highly anticipated bid for AMP Capital is set to be for only part of the funds management division, according to sources.
The Australian columnist John Durie revealed on Monday that Ares Management is working to close a purchase of the $3.1bn unit as early as this week.
It comes after AMP told investors last week while handing down its full year results that Ares had abandoned its bid for AMP but that it continued to “engage constructively” with Ares on the possible sale of AMP Capital division.
AMP Capital has $193.8bn worth of infrastructure, real estate and equities under management, down 2.2 per cent, and is considered the ‘jewel in the crown’.
The understanding is that a partial sell down would enable AMP to pay a special dividend and launch a share buyback program while participating in any upside that the business was to experience.
It would also prevent the separation of the business from AMP’s bank and wealth manager.
Ares, meanwhile, is believed to be hoping for a controlling stake to enable the global asset manager to add infrastructure to its global platform.
Sources say that a formal offer by Ares is set to value AMP Capital at slightly more than $3.2bn, higher than the $3bn or 87c per share valuation estimate by analysts at investment bank Citi.
The move by Ares to bid only for AMP Capital was flagged by DataRoom on February 7 after hopes started to fade during December that the US-based suitor would buy the entire business.
Ares was always known to be keen to own only AMP Capital, but finding buyers for the remaining wealth and banking operations at an acceptable price has proved to be challenging.
Last week, AMP reported a 32.8 per cent fall in its 2020 underlying profit to $295m, including $110m from wealth management, $119m from its bank and $139m from AMP Capital.
Ares, which counts former Credit Suisse Australia boss John Knox as its Australian and NZ chairman, put forward an informal bid for all of AMP at $1.85 per share, valuing the company at the time at $6.4bn in a cash-and-scrip proposal last year.
The group has been carrying out due diligence with assistance from Morgan Stanley.
The understanding is that there have been only a limited number of parties that are keen buyers of the bank or wealth management arm at a strong price.
A break-up of AMP is considered difficult because of the reliance of the bank on other AMP divisions for its deposits, while AMP Capital relies on the wealth management arm for investment capital.
AMP had been working with Goldman Sachs, Credit Suisse and Blackpeak Capital.
More Coverage
Jarden deal-makers sharpen their focus on lifting share
This year expect more Australian corporations to reshape their portfolios and private equity to consider floats as an investment exit option, says Jarden Group.
Debt capital markets proceeds up
Debt capital markets proceeds for Australia increased more than 16 per cent in 2024 compared to the previous year as corporates became more confident that inflation was being reined in.