Ares working full bid for all of AMP private markets arm

Ares Management is pushing ahead with a cash offer for all of AMP’s $59bn private markets unit, but differences of opinion on price and deal structure remain.

AMP chairman Debra Hazelton confronts a testing 11 days ahead, as suitor Ares circles and the wealth group convenes its AGM. Picture: John Feder.

US suitor Ares Management is forging ahead with a cash offer for all of AMP’s $59bn private markets unit, despite the under-pressure wealth group’s preference for a joint venture.

The Australian understands the Ares deal team wants to buy the division — that houses infrastructure and real estate investments — in its entirety and may lob an offer ahead of AMP’s annual general meeting on April 30. The deliberations will again come down to price and deal structure and are finely balanced, given several attempts to seal a transaction have already fallen over.

Sources said a bid price for the division would take into account any deterioration in income since negotiations to buy the ­division began earlier this year. Ares abandoned a $6bn-plus whole-of-company bid for AMP in February.

In recent weeks, AMP’s camp had been pushing for the proposed transaction structure to remain that the US firm acquires 60 per cent of a joint venture and takes management control, leaving AMP to hold the remainder. The indicative deal terms valued the joint venture at $2.25bn, given AMP was retaining assets and consideration linked to fund performance and interest.

AMP’s board led by Debra Hazelton is understood to be keen to share in the growth ­potential of the infrastructure and real estate business by remaining invested.

An AMP spokesman declined to comment.

In March, Ares told its investors a potential deal with AMP may “materially differ” from an indicative offer for the private markets division, and be subject to conditions and structural considerations.

The volatile deal talks have sparked investor frustration at the process, given AMP’s board started a strategic review and ­potential sale of its business in early September last year.

Several shareholders are pushing for AMP to either ­secure a deal in a timely fashion with Ares for the private markets unit, or spin off the division on the ASX.

The most recent twist was the expiration of a 30-day exclusive negotiation period for Ares to buy the 60 per cent stake in the private markets unit. That came to an end last month, but the ­parties continued negotiations after Ares signalled it was also interested in buying the entire division. AMP shares fell 0.8 per cent on Monday to $1.18, still above a COVID-19 low of $1.11 hit in March last year.

The 172-year-old wealth group and asset manager has taken a battering on several fronts over the past 12 months, including losing chairman David Murray last year due to two conduct scandals that engulfed the company. They resulted in AMP Australia boss Alex Wade leaving the group and former head of AMP Capital Boe Pahari demoted, after both executives were entangled in instances of inappropriate conduct.

Early this month, AMP announced chief executive Francesco De Ferrari was being replaced by ANZ deputy CEO Alexis George in the third quarter. The incumbent boss’s exit was linked to the end of AMP’s portfolio review.

But given the ongoing scandals and the interruption of COVID-19, Mr De Ferrari was finding it difficult to gain traction on his strategy.

The AMP Capital division, deemed the jewel in the crown that includes the private markets and equities and fixed-income arms, saw its underlying earnings fall in 2020 to $139m, from $204m in the prior year. AMP’s other three divisions also separately posted lower profits.

The private markets unit’s assets under management fell to $59bn in 2020, from $62bn in the prior year. However, the division has posted strong growth since 2014, when it had $28bn under management.

For the 2020 calendar year, the private markets arm had revenue of $475m, down from $492m in the previous year.

While the unit is attractive to New York-listed Ares, investors fear that continued uncertainty around its future will harm its performance and lead to further staff departures.

Ares has about $US197bn ($253bn) in assets under management. AMP Capital manages almost $194bn.

Prior to AMP’s AGM, unitholders in the AMP Capital ­Diversified Property Fund will vote on whether to merge with a rival Dexus fund, as jostling for control of the $5bn vehicle comes to a head.

That vote is set for April 27.

Proxy advisers Ownership Matters and CGI Glass Lewis separately told investors last week to support AMP’s pay report, but vote against a long-term bonus share grant to Mr De Ferrari.