Get on with it: AMP, Ares talks frustrate investors

AMP and suitor Ares Management are coming under intense investor pressure to draw a line under protracted deal talks.

AMP’s board and CEO Francesco De Ferrari are under intense pressure over stalling deal deliberations with Ares. Picture: Britta Campion

AMP and suitor Ares Management are under intense investor pressure to draw a line under protracted deal talks, after an exclusivity period for the sale of a majority stake in the group’s private markets arm expired and Ares signalled interest in buying the entire unit.

This is the third plank in transaction negotiations between 172-year-old AMP and US firm Ares, after the buyer in February abandoned a $6bn-plus indicative bid for all of AMP and the pair then worked towards forming a private markets joint venture.

The stop-start deal negotiations are frustrating AMP shareholders as uncertainty around securing a binding transaction is negative for employees and investors in the company’s investment funds.

In an ASX statement on Monday, AMP confirmed the 30-day exclusivity period - for an indicative agreement which would see Ares acquire 60 per cent of its private markets unit - had concluded.

“AMP and Ares continue to work towards a potential transaction and Ares has expressed interest in acquiring 100 per cent of the private markets businesses,” the statement said.

“There is no certainty that a transaction will proceed, or the terms, size or structure on which it would proceed. Any transaction would remain subject to approval of AMP shareholders.”

The Australian last week foreshadowed AMP and Ares would not reach an agreement within the 30-day exclusivity period, sparking investor jitters and calls for the company’s board to assess a spin off of the private markets division, which houses infrastructure and real estate investments and funds.

AMP’s shares tumbled 3.3 per cent on Monday to close at $1.30, marking the lowest daily close since late October.

Merlon Capital Partners’ Hamish Carlisle said the prolonged nature of negotiations with Ares was damaging to AMP’s employees and investor perceptions.

“It is unclear which side (AMP or Ares) has been holding up the (deal) process... The only certainty is every additional day (the deliberations continue) it is challenging for the business to move forward and that‘s problematic for all sides,” he added.

“In the absence of that information (income statements for the private markets unit up for sale) it‘s impossible to say whether the transaction announced a month ago is a good deal or a bad deal. Both (a sale or spin off of private markets) achieve the benefits of distancing the business from the AMP brand so it’s a question of which maximises shareholder value.”

Merlon, an AMP shareholder, has been pushing for a spin off of the private markets division more than two years.

“We have for a number of years dating back as far as when Francesco (De Ferrari) started, advocated the spin off of the private markets business and that position hasn‘t changed,” Mr Carlisle said.

Allan Gray portfolio manager Simon Mawhinney, a large AMP shareholder, is also frustrated at the protracted deal talks, noting on Monday “time is definitely running out” for the parties.

He doesn’t have a view, though, on whether it is better for investors for Ares to acquire a majority stake or all of AMP’s private markets unit or for the division to be spun out and listed.

“I’m not applying my mind to it... until we have something concrete in front of us there is just no reason this should take up too much time,” Mr Mawhinney said.

The indicative terms for the Ares deal, outlined last month, would see the US firm acquire 60 per cent of the $2.25bn joint venture and take management control. AMP was to own the remaining stake.

Velocity Trade analyst Brett Le Mesurier said he did not see the proposed terms for the 60 per cent sale of AMP’s private markets business as compelling for shareholders.

“With Ares there is the appearance of one failed transaction after another,” he added.

The failure to secure a private markets deal came after AMP did not rule out the eventual departure of chief executive Francesco De Ferrari last week, if a transaction was sealed with Ares or to spin off the capital division.

AMP said it was conducting a leadership and strategy review but Mr De Ferrari had not resigned, fending off speculation he was poised to depart.

AMP’s private markets arm sits within the capital division which also houses the equities and fixed income business. The wealth group and asset manager is also seeking a buyer or partner for its equities and fixed income arms.

AMP on Monday separately announced it was ending a management agreement with listed New Zealand real estate investment trust Precinct Properties, allowing Precinct to internalise management for a one-off payment of $NZ215m.

The transaction will deliver an $80 million estimated profit to AMP Capital, subject to foreign exchange conversion.

The statement said the Precinct deal had not been part of negotiations between Ares and AMP on the private markets division.