AMP closing in on $44bn funds sale with efforts to spark bids for key office fund
AMP is headed inexorably towards selling off its prized $44bn funds management unit, amid efforts to spark a shootout for the management rights of a key $8bn office fund.
AMP is headed inexorably towards selling off its prized $44bn funds management unit amid last-minute efforts to spark a shootout for the management rights of a key $8bn office fund.
AMP is locked in talks with property heavyweight Dexus, which is poised to acquire the management rights to the $31bn local property and infrastructure platform, despite a late charge by Mirvac to run the AMP Capital Wholesale Office Fund.
The prospect of yet another battle for the office fund looms as Mirvac seeks due diligence for its proposal to run the vehicle, while AMP remains confident of getting a deal over the line with Dexus after earlier talks with other suitors failed.
AMP sources said in sealing several deals to sell and break up the former AMP Capital business – now known as Collimate Capital – the board was seeking certainty for shareholders, reflecting clean deal structures with few conditions. That means AMP is closely assessing any warranty clauses included in sale documentation. With a deal close to being wrapped up ahead of AMP’s self-imposed deadline to provide some clarity to beleaguered investors by the month’s end, Dexus is seeking to satisfy the requirements of big property and infrastructure investors.
It will outlay between $200m and $300m for the management rights, as first reported by The Australian last week, with another sum to come for co-investment stakes in the trusts.
Mirvac has made a run at the office fund, and sources initially said it could count on the support of more than 50 per cent of investors in that vehicle, giving it effective control of its destiny.
But large investors have indicated that if a sale to Dexus went ahead and the fund’s governance is modernised, they would be satisfied to stay with the platform.
The Australian revealed on Thursday that Mirvac was seeking to muscle its way into a transaction for the management rights of the fund, which owns stakes in Sydney’s Quay Quarter Tower and Melbourne’s Collins Place.
Big superannuation funds could also opt for the stability offered by a shift of the entire local Collimate Capital team to Dexus.
A vote to change the fund constitution to a 50 per cent hurdle to change managers will be held on Thursday and Dexus has also pledged improvements to the vehicle, investors said.
Some of the original dissenters to AMP deciding the fund’s future are believed to be placated by the prospect of Dexus running the vehicle – throwing into question Mirvac’s hold on a majority of investors.
Listed investors are not concerned about the prospect of a split of the property operation between Dexus and Mirvac as AMP edges closer to unveiling the Collimate Capital sale.
An announcement may be made as early as Tuesday.
One listed property manager said the business could still be broken up into smaller pieces. “It’s just a shoot out. Even if Mirvac gets the office fund, Dexus will get the balance; it’s just a matter of price,” he said.
A separate battle for the offshore infrastructure equity business is playing out between Apollo Global Management and Digitalbridge.
The convoluted process for both the overall AMP funds management business and the office fund has dragged out for more than 12 months.
Any break-up would further splinter the once blue-chip business, effectively bringing an era of the company controlling some of the best office and shopping centres to an end.
The fight over the office fund has been shaped by its super fund investors, which have tapped law firm Allens for advice, as they sought to protect their interests.
The emergence of Mirvac as a serious contender for the fund would add to that company’s lustre as a manager of big office vehicles. Dexus can still lay claim to dramatically increasing the scope of its funds management empire and is promoting its claims to the office fund.
The disjointed process that has led AMP to a potential break up of its local property holdings comes after months of uncertainty in which it dealt with a series of suitors including Asian logistics giant ESR and property funds manager HomeCo.
One asset consultant said the key for settling down the funds was ensuring that the conflicts that were inherent in holding multiple funds were managed, a key issue for the Dexus bid.
He said Dexus had done a good job managing its existing institutional funds and managing conflicts between mandates to date. “The proposed acquisition will create significant additional potential conflicts (between office mandates in particular) and investors will need to be comfortable that these will be well managed,” he said.
The deal-making has cast some doubt over AMP’s capacity to quickly make a capital return in the wake of the Collimate Capital transactions, with the uncertainty likely to crimp the opportunity for any immediate action. Investors have expressed a desire for AMP to return capital after it completed the separate sales of its infrastructure debt division and global equities and fixed income arm in recent months.
Corporate governance experts have warned that AMP could face a strike over its remuneration practices at its forthcoming annual meeting on May 20.
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