AMP To Reinvigorate Private Markets

Australia | Mar 03 2021

AMP has plans to reinvigorate its private markets business, scoping a joint venture deal with Ares Management

-Deal provides some value uplift for AMP
-Should the private markets be hived off completely?
-Hope for some momentum in AMP in FY21


By Eva Brocklehurst

With a turnaround in wealth management a sizeable task and completion some way off, AMP Ltd ((AMP)) has decided to reinvigorate its business with the sale of a stake in its private markets division, AMP Capital Investors.

A non-binding agreement with US asset manager Ares Management has been instigated for the sale of 60% of AMPCI, at $2.5bn, excluding seed capital and sponsor investments worth $500m. The deal results in a joint venture for the infrastructure equity & debt, real estate and other private markets investments, with Ares assuming management control and AMP retaining 40%.

In reviewing its valuation in light of the bid, Ord Minnett makes no changes to forecasts and assesses the price of the 60% stake has an implied value for the private markets business of $0.33 per share.

This is more than the value the broker attributes to the whole of AMPCI. The price paid arguably includes a control premium, and there is no guarantee a premium is warranted for the AMP stake, although Ord Minnett acknowledges a deal could influence the value of the remainder.

Citi believes the transaction will provide some value uplift for AMP, albeit with a cost impact on earnings, and calculates it will add around $0.15 to the valuation of the stock. There is no indication in this preliminary announcement of the separation costs or value for the remaining parts of AMPCI.

In terms of stranded costs, the company has indicated the private markets business is relatively lean and stranded costs will be determined by the future of the global equities/fixed income business, in which it is pursuing a potential sale/partnership.

The broker calculates transaction should yield around $1.5bn in net proceeds. It also allows AMP to continue participating in what should be an improved growth performance in the private market business, given the turnaround of wealth remains arduous.

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