AMP says ‘no certainty’ over Ares deal

AMP has once again failed to finalise a deal with Ares, in what investors say could be a ploy by the US investment firm to drive down the sale price amid uncertainty over the ASX-listed wealth manager’s leadership.

AMP signed a non-binding agreement in February to carve out AMP Capital’s private markets business and sell 60 per cent to Ares for $1.35 billion.

The wealth manager told the market on Monday morning this deal had not progressed to a binding agreement, after the 30-day exclusivity period between the two parties ended on Sunday.

AMP chief Francesco De Ferrari. The wealth giant says there is ‘no certainty’ deal with Ares will proceed. Credit: Dominic Lorrimer

This was the second time a deal with Ares was unable to be finalised, after the Los Angeles-headquartered firm withdrew its offer to buy 100 per cent of AMP’s shares last month.

AMP has maintained negotiations with Ares are ongoing and the door is now open for other suitors to step forward. “AMP and Ares continue to work towards a potential transaction and Ares has expressed interest in acquiring 100 per cent of the private markets businesses,” it said.

“There is no certainty that a transaction will proceed, or the terms, size or structure on which it would proceed. Any transaction would remain subject to approval of AMP shareholders.”

The Australian Financial Review reported last Thursday chief executive Francesco De Ferrari would resign immediately. The report sent AMP into a trading halt and ultimately forced the board to concede it was negotiating the group’s leadership following the portfolio review.

Morningstar analyst Shaun Ler said Ares could be trying to take advantage of the uncertainty around AMP’s leadership to push down the sale price. “They might be looking to get AMP Capital’s assets at a bargain price, given everything that’s happening.

“The bigger question is what does this mean for AMP? My view is they will get smaller, they will get rid of their stake in AMP Capital one way or another. If the deal doesn’t go through, they will most likely spin it off.”

Mr Ler said there would be “real interest” in AMP Capital as a standalone asset, given the low interest rate environment fuelling mergers and acquisitions activity.

Atlas Funds Management chief investment officer Hugh Dive also said it was likely Ares was pursuing “a good little strategy” to buy the asset at a distressed price.

Mr Dive, who sold out of AMP in 2018 in the early weeks of the banking royal commission, said any new potential buyers would likely be “confident” international investment firms. “Domestic players are aware of the issues and don’t want to buy it.”

Pengana chief executive Russel Pillemer said AMP was in a tough position. “The US private equity firms are obviously savvy investors and smart negotiators ... You wouldn’t want to be on the receiving end.”

Pengana fund manager Rhett Kessler said the deal could be delayed as investors start to realise AMP’s assets are hard to separate. “Normally, the individual parts are worth more than the whole. That’s why you break it up. Here, together there are a lot of synergies.“

The past 12 months have been bruising for AMP, after an investor revolt over the botched handling of a sexual harassment complaint led to the resignations of chair David Murray and director John Fraser.

Mr Kessler also said AMP’s greatest asset is its intellectual property, adding talent might have been turned away by the scandals and reputational damage associated with the company. “Particularly in funds management, for young aspiring people, it might not be your workplace of choice.“

AMP launched the portfolio review last September after it claimed to have received unsolicited offers to buy parts of the company. However, more than six months later, only one party has officially emerged and no deals have been formalised.

AMP also announced on Monday it had agreed to end the management agreement of a New Zealand-based listed real estate investment trust for $197 million.

AMP’s shares fell by 3.35 per cent on Monday to close at $1.30 per share. Ares was contacted for comment.