Ares set for $3.1bn AMP Capital deal

Ares Management is working to close the $3.1bn purchase of AMP Capital as early as this week.

AMP chief executive Francesco De Ferrari. Picture: Britta Campion

Ares Management is working to close the $3.1bn purchase of AMP Capital as early as this week, leaving AMP chief Francesco De Ferrari the difficult task of turning around its battered wealth management business.

The potential sale of AMP Capital is imminent but sources on both sides of the deal played down the chance of any definitive news on Monday.

Shareholders would expect a capital return from any deal, and then the big question is how Mr De Ferrari manages the rump. He has a huge task in restoring what was once the premier name in Australian wealth management.

But the company’s demise is a long-running issue, over the last 40 years or more.

Past hubris, a raft of new competitors, technology, and finally the financial services royal commission two years ago have battered the brand but it still has value.

Last week the company reported underlying profits of $295m, including $110m from wealth management, $119m for its blue chip bank and $139m from AMP Capital. Head office costs of $109m are an obvious target for Mr De Ferrari.

The company has put aside $778m for royal commission remediation, of which some $405m has already been spent on a range of compensation payments such as charging fees for no service and the like.

Not included is the potential cost of a list of class action lawsuits, including from AMP planners whacked by a big cut in the promised payout when the company bought back their business.

Step one for Mr De Ferrari is to stem the $8.3bn in outflows including from corporate accounts such as Anglican Super which in total has pulled $1.8bn in funds.

The federal government’s early release super scheme also saw another $1.8bn in funds walk and in a business which makes money based on assets under management that’s not good.

Mr De Ferrari likes to share the blame, saying the government needs to ease the rules around simple accounts managed remotely, and while he may have an argument the fact is AMP’s problems are internally generated.

This means they need to be fixed internally.

His North platform, one of the few benefits of the ill-fated $4.2bn AXA takeover 10 years ago, is still performing well. The bank is also more than holding its own.

The good news is chair Debra Hazelton is gaining market respect and is widely seen to be performing well in her role, having been left to pick up the pieces after a string of internal snafus.

Mr De Ferrari has consultants Symmetra on the job aimed improving the company’s corporate culture, but it’s a long slow process for the smooth-talking Italian.