AMP takeover bid by US firm higher than thought at $6bn plus

AMP has revealed the price of its takeover offer by a US firm, and while it’s substantially more than expected, observers have other ideas.

The takeover price offered to ailing financial services giant AMP is significantly higher than expected at $6.36 billion, sending its shares higher for the second straight trading day.

AMP announced on Friday it had received an indicative, non-binding and conditional proposal from New York Stock Exchange-listed global asset manager Ares Management Corporation but did not reveal the price.

Investment bank Morgan Stanley noted media reports suggested the offer valued AMP at more than $5 billion, broadly in line with its own valuation of $5.36 billion or $1.60 per share.

But on Monday, AMP told the Australian Securities Exchange the bid had an implied value of $1.85 per share.

The company’s shares jumped as high as $1.68 in intraday trade, giving it a current market capitalisation of about $5.3 billion.

“AMP emphasises the preliminary nature of the proposal and discussions between itself and Ares, and that there is no guarantee that a transaction will eventuate and no certainty with regards to price,” the target said.

The company continues to review its assets after completing the $3 billion sale of its life insurance business in July, with plans to become to a “simpler, leaner business” and says its options include continuing to pursue its three-year “transformation strategy” after a torrid couple of years.

AMP chairman David Murray quit in August over an executive’s controversial promotion. Picture: AAP/Joel Carrett

But investment bank Citi Research has a different idea, suggesting a tie-up with Macquarie Group could be a compelling alternative.

“We see a tie-up with Macquarie as having potential to 1) create more value, 2) accelerate shareholder returns and 3) allow AMP to control its destiny,” Citi said in a report on Monday.

“In time, we estimate this could produce a stretch valuation closer to about $7 billion ($2.10 per share).”

AMP was excoriated by the Hayne royal commission into banking misconduct, which revealed it was among some of Australia’s biggest financial institutions charging customers for services that were not provided or delivered poor value.

Shareholder class actions were launched as a result of the revelations.

AMP posted a $2.5 billion full-year net loss in February, then in August key executives stood down over a controversial appointment.

Chairman David Murray and director John Fraser resigned in response to feedback about the promotion of Boe Pahari to head of AMP Capital despite previous sexual harassment allegations against him.

Mr Pahari was demoted to his previous position.

AMP shares have been in free fall in recent years, plunging from $6.70 in February 2015.