Ruffled feathers at AMP as De Ferrari wobbles and Ares goes into extra time

Picture:. Hollie Adams

Relations between AMP’s under pressure board and chief executive Francesco De Ferrari have proven frosty ever since the departure of former chairman and financial services veteran David Murray last year.

Stark differences of opinion on AMP’s strategic direction and frustration on the best way forward abound on both sides of the fence.

The hollowed out board led by Debra Hazelton — after the exit of Murray and non-executive director John Fraser in August 2020 — has been reeling and this column understands there were a number of sore points between it and De Ferrari.

While De Ferrari was confirmed late on Thursday as the AMP chief executive, the one line statement issued by the group raised more questions than it answered. If De Ferrari was fully committed and on deck, the ASX statement would have been more detailed and well rounded, and likely included a quote from the chairman or the CEO.

De Ferrari walked into a mess at AMP in December 2018 and has struggled to gain traction on his turnaround strategy given the prevalence of scandals at the group.

That was compounded by an unforeseen global pandemic last year, that shifted the dial for many months to crisis mode.

Part of the issue for De Ferrari, amid AMP’s conduct issues of 2020 was that he and Murray were keen supporters of Boe Pahari to lead the AMP Capital business. Pahari was seen as the right person to lead the jewel in the crown division, spanning infrastructure, real estate and equities, when he was promoted to the role last June.

The duo underestimated, though, the furore that was unleashed by revelations of Pahari’s prior sexual harassment complaint and financial penalty, and the fallout that would ensue.

Tensions between De Ferrari and the board ramped up in October as the company and its army of advisers were navigating how to move forward with a sale of all or part of the company.

The strategic review had already commenced and US firm Ares Management was soon to be outed as a potential buyer of the entire company for more than $6bn.

That bid fell over this year and Ares continues to work behind the scenes on an acquisition of a controlling stake in AMP’s private markets business.

The next few weeks will prove key for AMP on several fronts, including whether De Ferrari vacates the CEO role that he has only held for a little over two years.

De Ferrari last year splashed out more than $10m on the mansion Weeroona in Woollahra in Sydney’s eastern suburbs, suggesting he would be in the city for some time.

But as long time AMP watchers know, the company has a history of lurching from one crisis to the next and the prevailing situation can change very quickly.

Extra time

AMP and the suitor for the bulk of its prized capital division, Ares, are up against time pressures on sealing a binding deal, and are leaning toward an extension of a key exclusivity period.

This column revealed the parties are close to sealing a short extension of the exclusive negotiating period to form a joint ownership structure for AMP’s private markets business.

A delay will no doubt leave long-suffering AMP shareholders jittery, given a tumultuous three years for the wealth and asset management group which now includes a possible exit of the CEO.

AMP and Ares had been hoping to have a binding agreement to cover the latter buying a controlling stake in AMP’s private markets business by the end of a 30-day exclusivity period, but talks are dragging on and there are still key matters to be resolved.

An announcement on whether the parties would secure a binding transaction had been expected on or before March 29, which is the first business day after the end of a 30-day exclusivity period.

An AMP spokesman declined to comment on the deal.

But ructions in AMP’s real estate unit have complicated the deliberations, as two funds assess removing AMP as the manager.

Those headaches include the AMP Capital Diversified Property Fund, where an independent board committee has recommended a proposal to merge with the Dexus Wholesale Property Fund.

AMP Capital has put forward an alternative proposal to the merger, and any transaction is subject to a vote of fund unitholders.

The indicative transaction terms for the Ares deal were outlined by the 172-year-old AMP late last month, and would see the US firm acquire 60 per cent of the $2.25bn joint venture and take management control. AMP would own the remaining stake.

Ares in February abandoned its whole of company bid for AMP to focus on the lucrative private markets segment of the capital division. Private markets spans areas including infrastructure and real estate.

The deal negotiations are happening as Hazelton has been meeting AMP shareholders and proxy advisers ahead of an annual meeting next month. She is talking through the proposed Ares deal, and is also gauging concerns as the group looks to avert a second strike against its pay report.

Hazelton is being flanked by the head of AMP’s remuneration committee, Michael Sammells, and group executive of people Helen Livesey in those talks.

AMP’s long-term performance hurdles and incentive system, as part of proposed board changes to remuneration structure, are also being discussed. They seek to address concerns from the 2020 annual meeting.