Macquarie backs away from AMP assets buy

DataRoom understands that Macquarie, after assessing the merits of an acquisition of AMP, has moved on. Picture: Bloomberg

Macquarie Group is understood to have backed away from a possible acquisition of assets within AMP, which on Wednesday confirmed it would assess the merits of a break-up of the business.

The loss of appetite by the asset manager and investment banking powerhouse for parts of the operation could pose a dilemma for the company hoping to embark on an asset selldown.

When Macquarie was looking at AMP with Kohlberg Kravis Roberts about three years ago, the plan was always for the listed financial to take the bank, and it has also been interested in AMP Capital.

Macquarie had been closely monitoring the company for an acquisition since that time, along with buyout funds such as Blackstone and KKR.

However, buying an Australian bank is a near impossible feat for a global private equity firm due to heavy foreign ownership restrictions and now the question remains, what party could line up for the bank if Macquarie is no longer in the picture?

DataRoom understands that Macquarie, after assessing the merits of an acquisition of AMP, has moved on, with the view that the company’s operations were not essential to its own and it was non-core.

Some also say that concerns existed about the brand damage to the bank should it take on the operations of AMP, which has faced criticism over the corporate culture following sexual harassment allegations against AMP Capital boss Boe Pahari.

AMP on Wednesday said it was reviewing the group’s assets and businesses to “assess all options” for its strategy, including potential asset sales.

The Australian flagged last week that the financial had hired Goldman Sachs, along with Credit Suisse.

Previously, AMP counted Macquarie Capital and UBS as its advisers, and UBS was carrying out a review of AMP Capital late last year to assess the merits of a potential demerger, as revealed by DataRoom.

While plenty of interest is expected to exist for AMP Capital, with real estate groups such as Charter Hall, Lendlease and Dexus all circling, some believe that the bank may not be attractive to other smaller rivals such as Bank of Queensland — much of AMP bank’s business comes from deposits from its wealth management arm.

Analysts believe separating the bank and the wealth management operation could prove difficult for that reason.

To an extent, a separation of AMP Capital, which manages $192.4bn of infrastructure and real estate funds, could prove a challenge because AMP is one of the major investors.

However, smaller banks have considered mergers with their peers in the past.

It is worth remembering what happened when Westpac sold its asset manager, Hastings Funds Management. Investors dumped Hastings as its manager, with one fund replacing Hastings with Morrison & Co and another now under the management of Macquarie Group.