Ares in bank talks for AMP joint bid

Ares Management is in talks with at least three parties, including Macquarie, to participate in buying AMP’s bank as part of its broader $6bn-plus takeover.

Ares Australia and New Zealand chairman John Knox, former Credit Suisse Australia CEO, is spearheading work on the AMP bid. Picture: Hollie Adams

US suitor Ares Management is in active talks with at least three parties, including Macquarie Group, to participate in buying AMP’s bank as part of its broader $6bn-plus takeover tilt for the 172-year-old wealth group.

The Australian understands separate discussions are happening between Ares representatives and executives from Macquarie, Bank of Queensland and Bendigo and Adelaide Bank. The talks are at a commercial level, with the view to Ares selecting a party to buy AMP’s bank as part of a whole-of-company takeover.

Sources said AMP and its advisers were heavily involved in the process of Ares forming a consortium, given the wealth group would need to grant approval for other parties to join the due diligence process. Ares is expected to decide on a party to participate in its bid and buy AMP’s bank in coming weeks, while it is also looking for acquirers of the financial advice and wealth operations.

An Ares spokesman and an AMP spokesman declined to comment.

A non-binding offer by Ares, pitched in October at an implied value of $1.85 a share, resulted in the AMP board opening the door to a broad auction process and a data room. The bid is being spearheaded locally by Ares SSG Australia and New Zealand chairman John Knox, the former Credit ­Suisse Australia chief.

Given the indicative bid includes Ares’ stock, AMP also has to undertake reverse diligence on its potential buyer as the board figures out what course of action is in the best interests of the ­beleaguered company’s shareholders.

The Debra Hazelton-led AMP board, which endured a tumultuous 2020 including the exit of chairman David Murray and demotion of AMP Capital boss Boe Pahari, has its work cut out as it engages with Ares and continues to have oversight of a three-year turnaround plan.

AMP reports full-year earnings on February 11, meaning both it and Ares will want to have made some key decisions before then so the company can give investors a meaningful update on the sale process. AMP chief executive Francesco De Ferrari is understood to be on annual leave, returning on January 11.

Ares — which has a market capitalisation of $US12.07bn ($15.65bn) — is keen on AMP’s capital division, which manages $189bn across real estate, infrastructure and equities.

AMP’s bank is entwined with several of its other divisions, meaning a mooted transaction is complex. The bank has $17bn in deposits and a loan book of $20.6bn, making it attractive to boost the scale of regional players or Macquarie.

AMP’s banking division posted operating earnings of $50m for the six months to June 30, 2020, down from $71m in the same period a year earlier. At the group’s interim results, it also outlined a credit loss provision of $24m, after tax, for potential COVID-19-­related mortgage defaults.

AMP is likely to be pushing for a valuation of more than $1bn for the bank, given it had total capital resources of $991m as at June 30.

Representatives from BoQ, Bendigo and Adelaide Bank and Macquarie separately declined to comment on interest in AMP’s bank.

Macquarie was linked to a whole-of-company AMP bid in 2018, as the wealth group was hit by controversy at the Hayne royal commission. Before that, Macquarie was said to have been weighing a joint offer for AMP with the assistance of KKR & Co and China Life.

In 2018, Macquarie had been working for AMP alongside UBS on a potential sale of the business or its divisions, before dropping away from the mandate to assess its own offer.

Bendigo and Adelaide Bank has been in and around the recent AMP sale process, while BoQ has focused on organic growth but has not ruled out acquisitions. One of the big four banks is also thought to have earlier expressed interest in AMP’s bank.

AMP’s shares fell 1.6 per cent to $1.535 on Tuesday, below Ares’ indicative bid price.

“I would have thought if the bid doesn’t get up there is a lot of downside in the [AMP[ share price,” Velocity Trade analyst Brett Le Mesurier said. He estimates the stock could slide as much as 20 per cent from current levels if Ares withdraws its offer.

Mr Le Mesurier has pencilled in a tough year for AMP, estimating net fund outflows of about $6bn in 2021 and continued margin pressure.

Ares has been stepping up its Asia-Pacific activity over the past 18 months.

In an announcement on Mr Knox’s appointment in September, it said it had been “particularly active” across Asia-Pacific over multiple transactions. They included the acquisition of SSG Capital Holdings, the formation of Ares Australia Management through a joint venture with Fidante Partners and a partnership with Sumitomo Mitsui.