KKR & Co eyes bid for AMP’s investment platform unit, makes informal approach

KKR & Co has made an informal approach to AMP in recent weeks about buying the wealth group’s investment platform business, sources say.

AMP on Wednesday confirmed investment banks Goldman Sachs and Credit Suisse were advising the group on inbound offers. Picture: NCA NewsWire / Steven Saphore

Private equity giant KKR & Co has made an informal approach to under-pressure AMP about buying its investment platform business, as the 171-year old wealth manager effectively flung open the door to a sale or break-up of group.

The Australian understands while the offer wasn’t final or binding, KKR wants a seat at the table should the entire AMP business be broken up.

According to sources, the private equity firm expressed interest in recent weeks in the $46bn in assets on AMP’s North investment platform, which also saw net cashflows increase in the six months ended June 30.

That comes against the backdrop of AMP’s now Debra Hazelton-led board on Wednesday saying it was taking a “decisive step” to kick off a fresh strategic review to consider options, including a sale of all or part of the business.

The AMP board will “assess all options to maximise shareholder value”, the statement said.

“AMP periodically receives unsolicited interest in its assets and businesses, and recently has experienced an increase in interest and inquiries. The board has therefore decided to undertake a portfolio review to assess all opportunities in a considered and holistic manner.”

An AMP spokesman declined to comment on any specific interest fielded by the company in buying its business units. A KKR spokesman also wouldn’t comment.

Real estate and property groups are also said to be running a rule over parts of AMP Capital, with the view of forming potential bidding groups for a break-up play.

AMP’s shares surged 4.9 per cent to $1.615 in Wednesday’s trading, as investors cheered the possibility of deal activity after a turbulent period for the wealth group which has left two of its divisions without permanent executive leadership.

AMP last month came under heavy shareholder fire over its culture and the handling of harassment allegations, losing its chairman David Murray and fellow board member John Fraser. The former head of AMP Capital, Boe Pahari — the subject of a 2017 sexual harassment complaint — was elevated to the role in July then demoted last week to his prior role in infrastructure ­equity.

AMP’s Australia boss Alex Wade abruptly left the company a month ago, in a departure linked to poor conduct and the sending of lewd photos to a female employee.

Investors will be keen to see how AMP’s latest review of its business units plays out, this time with Goldman Sachs and Credit Suisse as its investment banking advisers, as revealed by The Australian last week.

AMP has conducted a number of strategic reviews in the past two years, and has previously opted to double down on chief executive Francesco De Ferrari’s three-year transformation strategy.

The domestic wealth management sector has seen a wave of rationalisation, though, after the Hayne royal commission as the major banks have retreated from the industry back to their core operations.

Three months ago, KKR agreed to buy 55 per cent of Commonwealth Bank’s wealth division Colonial First State for $1.7bn, giving it a strong foothold in the sector.

While that transaction is yet to complete, and the private equity firm is said to have its medium-term sights on moving to 100 per cent ownership of Colonial, broader consolidation moves in the landscape mean parties are jostling for a slice of the action.

Melbourne-based IOOF this week agreed to acquire National Australia Bank’s MLC division in a $1.4bn transformation deal, that will also take some months to receive regulatory approvals and completion.

In addition, Westpac is considering whether to sell its wealth business, including its investment platforms, as part of a wider strategic review.

Wealth platforms hold a customer’s investments in one central place and provide a consolidated view of holdings and tax reporting.

Shaw and Partners analyst Brett Le Mesurier said despite pressure on margins, the North platform was the most attractive part of AMP’s wealth management arm.

“For the last five half-yearly periods, North is the only product which has received net cash inflows,” he added.

AMP Capital — the group’s infrastructure, real estate, equities and funds management division — is also piquing the interest of potential buyers, and shareholders see merit in a sale or spin-off of the unit.

Last month, The Australian flagged that former AMP Capital boss Adam Tindall had put a demerger proposal for the unit to the board earlier this year, which was knocked back given it wasn’t a fully-formed plan.

Macquarie Group and private equity groups including KKR have been linked to potential bids for AMP in the past two years.

The $3bn sale of AMP’s life insurance operations has also made the group more attractive to some potential buyers, given it has provided a balance sheet boost and some suitors didn’t see value in the capital-intensive insurance division.

Still, JPMorgan analysts highlighted potential constraints in selling off parts of AMP’s business, which are linked together by fund flows from customers in the wealth management division.

“The bank and Australian Wealth Management may need to be sold together, noting that a significant portion of the bank’s funding comes from deposits provided by customers of the wealth manager,” they said, adding that AMP had a deposit to loan ratio of 81 per cent.

“This may make it harder for some buyers to consider taking an ownership stake.”

JPMorgan also noted AMP had abandoned plans to sell its New Zealand arm, after price expectations weren’t met.

AMP Capital also has strong links to the group’s wealth business.

AMP last month announced it would repurchase Mitsubishi UFJ Trust and Banking Corporation’s 15 per cent stake in AMP Capital, giving that division a valuation of about $2.7bn.

Future Fund chairman Peter Costello on Wednesday said he believed the outcomes of last week’s investor revolt against AMP, including the board exits and Mr Pahari’s demotion, were right.

“We did communicate back to the AMP that we expected high standards, we expected people we will deal with and we do deal with AMP Capital, to exhibit high standards,” he added.
“The way that was resolved in the end was the right way.

“Of course it would have been better, wouldn’t it, if that hadn’t occurred … but we all make mistakes I guess.’’

Additional reporting: Eli Greenblat