AMP stands to pocket almost A$430 million after offloading its infrastructure debt business to former US suitor Ares Management in a surprise pre-Christmas deal set to further simplify a planned demerger of the group’s private markets investment arm.
Under the arrangement AMP will transfer most of its infrastructure debt assets to Ares this quarter for a cash consideration of A$428 million. Late in 2020 the Los Angeles-based Ares was vying for full control of the ASX-listed AMP before downgrading its bid to the AMP Capital private markets arm only early the following year – ultimately failing to secure an agreement.
In the wake of the scuttled Ares offer, AMP revealed plans to spin off the AMP Capital private markets arm in an ASX listing while selling its in-house managed fixed income and equities assets to Macquarie.
However, Ares says in a release it would add about US$8 billion to its infrastructure assets business after finally landing a piece of the AMP Capital private markets pie.
Michael Arougheti, Ares chief, said the AMP assets represent a “highly complementary infrastructure debt platform”.
“We believe that this strategic combination will further propel our infrastructure investment capabilities and expand our global footprint,” Arougheti said. “The team shares a similar credit mindset with Ares, and our infrastructure leadership has enjoyed a great relationship with [AMP Capital infrastructure debt head, Patrick Trears] and other senior leaders for over a decade. Together we believe we are well-positioned to leverage the full scale of the Ares platform and relationships to provide optimal capital solutions for our investment partners and generate attractive risk-adjusted returns for our investors.”
Post-sale, Trears and team would transfer to Ares, reporting to a newly formed real assets division in the US$282 billion investment management group. The Ares Real Assets Group would manage about US$48 billion, according to the statement.
Meanwhile, AMP would use the cash and reduced capital requirements to shore-up its balance sheet ahead of the private markets demerger slated for the first half of 2022.
Shawn Johnson, head of PrivateMarketsCo – the vehicle established late last year to house the AMP Capital real assets – said in a release: “This transaction provides strong outcomes for both our Infrastructure Debt clients and our shareholders. Infrastructure Debt will further accelerate its growth as part of Ares’ global alternative investment platform, benefitting the clients who have supported it through its early stages under our ownership.”
While Ares picks up the majority of the AMP Capital infrastructure debt asset, PrivateMarketsCo will retain about A$66 million of ‘sponsor investments’ and rights to A$84 million of carried interest in the now-closed infrastructure debt funds, IDF II – IDF IV.
“PrivateMarketsCo and AMP will realise significant value from the divestment, as well as retaining our valuable sponsor investments and carried interest in the closed Infrastructure Debt funds,” Johnson said. “This will provide a strong revenue stream in coming years as we demerge PrivateMarketsCo and accelerate the momentum in our business.”
The AMP share price bumped slightly higher following the Ares news but remains mired just under A$1 as at early January.