AMP auction at pointy end, Ares Management in final bid throes

AMP is waiting to see if a binding bid emerges for the company. Picture: Hollie Adams

AMP’s board portfolio review committee — which is assessing the sale process for the 171-year-old group — meets next week as the auction gets closer to the pointy end.

The next few weeks will be key to whether US suitor Ares Management lobs a $6bn-plus binding offer, after looking under the hood and assessing if it can untangle some of AMP’s business units.

This column understands further due diligence material was being prepared by AMP and its advisers this week, which will be provided to Ares and other potential suitors for the group or the capital division which manages $189bn across real estate, infrastructure and equities.

Goldman Sachs and Credit Suisse are spearheading the portfolio review and potential sale of AMP.

The indicative offer by Ares, pitched at an implied value at $1.85 per share, saw the AMP board open the door to a broad auction process and a data room.

At the same time as Ares crunches the numbers, an auction is being run for AMP’s real estate platform and offers are being considered for the capital division and other arms of the business. With the recent rally in bank stocks, AMP’s bank may also remerge on the radar of those seeking to bulk up in mortgages and deposits.

But some suitors have been reluctant to sign restrictive confidentiality agreements, which limit engagement with other bidders and also the sounding out of investors in AMP funds to gauge whether they would continue the relationship if there was a change in ownership. The restrictions focus on AMP’s competitors.

Those eyeing the capital division are not just concerned about the departure of key staff, the decamping of key investors is also a consideration.

One way AMP could circumvent some of those concerns would be to offer fee reductions to investors to see them through the auction process.

The AMP sales process is occurring alongside chief executive Francesco De Ferrari working through a three-year turnaround plan and the group considering its own strategic options.

Early this month, AMP revised its approved product list for financial advisers, to take into account the sale of its life insurance business to Resolution Life which does not write new policies. The panel now includes AIA, Westpac’s BT, MetLife, OnePath/Zurich and TAL. MLC Life is understood to have dropped off the list.

For the first time, the approved product list will be common across all of AMP’s licensees: AMP Financial Planning, Hillross and Charter.

AMP owns a 20 per cent stake in Resolution’s local entity as the parties continue to work through transition and service agreements on the life insurance deal.

Ares is yet to have detailed talks with Resolution around the minority stake, given the due diligence period is still underway.

Slanging match

The buy now pay later wars kicked into gear this week when Klarna chief executive Sebastian Siemiatkowski launched a broadside at Australia’s BNPL operators for the fees they charge retailers. He labelled them unsustainable and an “extortion scheme”.

Afterpay swung into action soon after, taking aim at Klarna’s advertised highest rate for merchants on its Australian website.

Klarna chief executive Sebastian Siemiatkowski. Picture: Adam Yip

That rate — of up to 5.49 per cent plus 30 basis points in transaction fees — would no doubt cause sticker shock for merchants if they do seek out information on Klarna’s website.

Especially given Siemiatkowski was hitting out at Afterpay’s average rate of 4.1 per cent.

Afterpay also argues Klarna is not making like-for-like comparisons on its merchant rates, given the Swedish group has a different target market for merchants and a string of other payment options in addition to instalments, which weigh on its average rates.

Payments stalwart Grant Halverson of McLean Roche Consulting estimates Klarna’s average fee for retailers in Australia is about 2.35 per cent.

In the UK, he puts the Klarna rate at 2.49 per cent which is accompanied by a transaction fee.

Siemiatkowski — also a co-founder of the Swedish payments group — said globally Klarna charged merchants an average 2.1 per cent. He declined to specify the average for Australia.

Siemiatkowski wants regulators to get more involved in Australia’s BNPL sector, in a similar fashion to the sweeping reforms of the nation’s credit card market in 2003 which allowed surcharging and capped interchange fees.

The mud throwing is far from over in this sector, as the likes of Afterpay and Klarna feel the heat from global giants including PayPal.

QBE hunt

QBE Insurance’s search for a new CEO to replace Pat Regan is said to be focused on candidates with extensive global experience, which may rule out local candidates such as former IAG Australia boss Mark Milliner.

QBE abruptly exited its CEO in September when Regan left due to a conduct issue. That related to communication with a US-based female employee via texts, email and a video call that included inappropriate behaviour.

Russell Reynolds Associates is conducting the QBE CEO search, while Johnson Partners are helping to fill the role of Australia boss.

QBE last month tapped international boss Richard Pryce as acting group CEO, as it continued a search for a permanent replacement for Regan. That appointment saw Mike Wilkins return to his position as chairman, rather than executive chairman.