UBS working overtime on AMP Capital

AMP Capital is under the spotlight, with its adviser UBS believed to be weighing options for the entity that has $200bn worth of assets under management.

Apparently investment bankers at UBS have been busy trying to determine whether its $6.36bn financial services client AMP should move away from AMP Capital, considered one of the most valuable parts of its business. While plenty of parties are believed to be keen to buy the business, it is thought UBS could be leaning towards a plan for its client that involves finding a capital partner to jointly own the asset manager.

The logical party for that is Japan’s Mitsubishi UFJ Trust, given it already owns 15 per cent and has first right of refusal to buy it.

Mitsubishi UFJ also purchased the Colonial First State Global Asset Management in 2018 for $4.13bn, which indicates it may be keen to take on AMP Capital as well.

Suggestions are UBS has been working on plans for AMP Capital since November, although the company has declined to comment on its intentions. Some expect more could be revealed when it delivers its next set of results.

It is understood many are pitching to AMP for a spin-off of its valuable real estate business that sits within the AMP Capital operation. Charter Hall and Macquarie Group have been named as logical owners.

Before Francesco de Ferrari was appointed as CEO in 2018 there was speculation that a sale of AMP’s bank was up for consideration. However, some believe a sale of the bank would be off limits while career banker David Murray remains in the chair. He was appointed before de Ferrari took the role in 2018.

Now it is thought de Ferrari’s plan is to heighten AMP’s focus on the banking area and a sale of AMP Capital would fund that plan. Last year, the group merged its bank and Australian wealth divisions and announced a management reshuffle as part of the move that the company pitched as one that would create a more integrated organisation.

It came after many big banks in Australia opted to sell off their wealth management operations and retain a focus more on banking. NAB is yet to divest its MLC wealth management division, although some believe a deal could be close. It is understood the bank has been negotiating with a buyer that has some private equity backing. Kohlberg Kravis Roberts and Blackstone’s La Trobe Financial are not thought to be in talks.

It is believed parties have approached the AMP to buy AMP Capital but have been rebuffed, with Macquarie seen as likely among them. One thought is AMP would only sell AMP Capital if it was unable to lock in a deal to offload its life insurance business to Resolution Life.

Resolution Life agreed last year to buy AMP Life for $3bn, but the deal is yet to complete and is subject to regulatory approvals in Australia, New Zealand and China. The transaction has been held up by new capital requirements introduced by the Reserve Bank of New Zealand that says the entity’s policies held by NZ residents have to be backed by local assets. It is understood Resolution Life is confident of winning a High Court challenge should it need to take on the central bank across the Tasman.

If put up for sale AMP Capital could be worth $2.5bn to $3bn.

For the first six months of AMP’s 2019 financial year, Capital generated $120m of its overall $316m in operating earnings.