Parties conducting due diligence on AMP Capital: sources

Three parties are believed to be carrying out due diligence on AMP Capital - the private markets business owned by Australian listed financial group AMP.

Sources say that the parties have quietly been given access to a data room by AMP ahead of plans for a demerger of the unit.

It is understood that at least one is US-based and one out of Asia has been building a stake in AMP.

A large number of global funds and private equity firms are said to have made approaches to AMP about AMP Capital, to be renamed Collimate Capital Funds Management.

AMP has been committed to a demerger and one theory is that the group could be simply moving to gain some competitive tension for the demerger.

The situation is unfolding as AMP Capital continues to wrestle with shareholders of the AMP Capital Wholesale Office Fund over its management of the $7.5bn worth of offices.

Law firm Allens has written to the group’s board expressing concerns about whether AMP is best placed to manage the fund ahead of a critical February 11 deadline.

The AMP trustee board had drafted in two new independent directors – corporate veterans Ming Long and Bob McKinnon – for a review of whether AMP stayed on last year but the point of tension for investors was that both hold non-executive roles elsewhere in the AMP empire and were not independent.

To keep investors, AMP Capital lowered its fees and recommended it not be replaced as manager, but sources close to the investors say that the issue was never about the fees but more about governance and staff.

Without that $7.5bn real estate portfolio to manage, the value of AMP Capital would be seen as seriously diminished.

AMP Capital, led by Shawn Johnson, is one of the largest Australian direct real estate and infrastructure fund managers with $44bn under its control.

Around Christmas, it sold its infrastructure debt platform for $428m to New York-listed Ares Management, the private equity firm that previously launched a buyout proposal for AMP.

Ares Management is not thought to be among the groups weighing an AMP Capital purchase.

AMP told the market in November that its AMP Capital demerger was on track to happen in the first half of this year and the group would hold a 20 per cent stake once listed.

The rationale was for the two businesses to focus on their respective markets and growth opportunities.

However, a key area of focus around the market is whether AMP has the appropriate capital structure to support a demerger.

Separate suggestions have surfaced in the market that AMP has recently been exploring acquisition opportunities including part or all of the wealth management business Colonial First State and Westpac’s BT Panorama unit, which is for sale.

A sale of AMP Capital could see the group use the proceeds to bolster its balance sheet, return funds to shareholders and make the acquisitions elsewhere.

Without acquisitions, it would leave AMP only with a bank and wealth management arm.

One theory has been that AMP Capital was a sitting target for a buyout once listed, and a deal to sell the business before a demerger could see AMP get on the front foot and drive the agenda.

Cashed up, deal hungry funds like KKR and The Carlyle Group have previously been suitors, while other possible contenders could be Blackstone or TA Associates amid the low interest rate environment, although the issue for any buyer is retaining the AMP Capital clients.

AMP’s challenges have been well documented in recent years, ranging from fees-for-no-service allegations surfacing in the royal commission into the financial sector to sexual harassment allegations against former AMP Capital chief executive Boe Pahari and top staff losses.

As a result, investors have lost confidence in the business and its share price has collapsed. Its market value is now about $3bn.

No doubt investors will be asking recently appointed chief executive Alexis George hard questions during its full year results Thursday as to where the group will find future growth.