Potential AMP bidders watch ructions, wait for dust to settle, share price declines

Several corporate and private equity buyers are thought to be keeping a watching brief or actively running the numbers on AMP.

AMP's new chairman Debra Hazelton confronts a huge task ahead to steady the wealth group as suitors circle. Picture: John Feder/The Australian.

AMP’s well-documented challenges have put the under-pressure wealth group on the radar of several suitors, some of whom are waiting for the dust to settle or further potential share price declines before deciding whether to pounce.

Investment banking sources said several corporate and private equity buyers were keeping a watching brief or actively running the numbers on AMP, particularly in light of recent turmoil among its executive and board ranks.

One investment banker said this week’s board resignations and the demotion of AMP Capital boss Boe Pahari may keep potential buyers on the sidelines for another six months, as AMP’s management looked to stabilise the operations.

Another banker noted that AMP was being stalked by several potential buyers, but some were waiting for another sharp dip in the stock before executing any takeover or break-up plans.

“Everyone is looking but no one is biting,” the banker said on the condition of anonymity.

Macquarie Group and a host of private equity groups including KKR & Co 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 it 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.

The sexual harassment scandal engulfing Mr Pahari led AMP chairman and banking stalwart David Murray and fellow AMP director and former Treasury secretary John Fraser to resign from the board on Monday.

Mr Pahari is moving back to his former role focusing on the capital division’s infrastructure equity business after investors ­rebelled against his promotion and the damage the 2017 sexual harassment complaint was causing AMP.

Mr Pahari’s elevation in July to head AMP Capital triggered a series of exits from the unit as he put his stamp on the team, and on Tuesday there were further departures announced as three senior staff in the equities division resigned.

Global global equities chief David Allen, Australian equities boss Genevieve Murray and head of sustainable investment Emily Woodland all separately handed in their resignations.

Ms Murray has been appointed to run listed equities at the Future Fund, while Mr Allen and Ms Woodland are also said to be en route to positions outside AMP.

Chief executive Francesco De Ferrari, flanked by his new chairman Debra Hazelton, presented a united front to AMP staff on Monday, who were also still reeling from this month’s sudden departure of head of Australia Alex Wade.

Mr Wade left due to conduct issues including sending lewd photos to a female employee, but AMP did not publicly provide reasons for his departure.

AMP’s two key divisions are now without permanent executive leadership.

AMP shares rallied a further 2.1 per cent to $1.475 on Tuesday, following a 1 per cent gain on Monday.

However, the stock is down more than 23 per cent this year, and AMP’s market value has slumped to $5.07bn.

Investors started rallying hard against Mr Pahari’s leadership of AMP Capital last week when sordid details of the sexual harassment complaint were made public by former subordinate Julia Szlakowski.

Ms Szlakowski’s complaint outlined Mr Pahari extending her London hotel booking without permission, calls and texts in the early hours of the morning after a night out, and referring to his “limp dick” when she declined to use his credit card to buy clothing.

Australian Eagle Asset Management portfolio manager Alan Kwan said while there was some merit in a break-up of AMP given recent controversies, the board and management still had a chance to improve earnings.

“There is clearly value there, the question is can they get some runs on the board,” he added.

“Can the business get some stabilisation in wealth management and some growth in AMP Capital? We need to see some evidence in terms of the culture review too.”

Australian Eagle, an AMP shareholder, highlights the $46bn in assets and recent inflows to its North investment platform and AMP Capital as big swing factors in the valuation of the group. This month, AMP handed down a 42 per cent drop in underlying profit to $149m for the six months ended June 30, compared to the same period in 2019. Investors applauded capital management plans unveiled at the same time, including a special dividend and share buyback amounting to a combined $544m.

AMP also announced it would repurchase Mitsubishi UFJ Trust and Banking Corporation’s 15 per cent stake in infrastructure and real estate arm AMP Capital, giving the entire business a valuation of about $2.7bn.

Allan Gray portfolio manager Simon Mawhinney said it was becoming increasingly clear that other groups may be able to manage AMP’s divisions “more profitably”.

“We are very happy to entertain takeover offers; we are not strategic owners,” he added. Allan Gray is a substantial shareholder in AMP.

AMP investor Hamish Carlisle, Merlon Capital Partners’ portfolio manager, has been pushing for the group to hive off the capital division.

“There are elements of the strategy that can be revisited,” he said, referring to the partial or full spin-off of AMP Capital to remove any perceived conflicts of interest between it and the wealth and banking division.

Former head of AMP Capital Adam Tindall is said to have been pushing for a separation of the division from the parent group ahead of his departure in the middle of the year.

Mr De Ferrari and his new chairman Ms Hazelton now have a string of challenges to navigate and vacancies to fill.

In a piece covered by local media about a decade ago, Ms Hazelton imparted advice to students at her former high school, Whitebridge in Newcastle, which could also be applied to the AMP situation.

She told students “not to assume any limits” in their ability to do things, and to take all presented opportunities.

“Because the more they take you out of your comfort zone, the better,” she said.

Ms Hazelton’s career background included executive stints at Japanese finance house Mizuho and Commonwealth Bank.