AMP has ‘suspended’ the sale of its NZ wealth arm pending a return to less-volatile trading conditions, according to sources close to the deal.
It is understood negotiations with short-list prospects – a group believed to include TA Associates, Mercer, Macquarie and KKR – have been halted.
The ASX-listed group has been trying to offload its NZ wealth business, headed by Blair Vernon, for at least two years, ditching a planned IPO for a trade sale approach last August.
Following a prolonged dalliance with prospective buyers, AMP was close to inking a deal (priced at between $400 million to $500 million) just as the coronavirus outbreak threw economies and markets into a spin.
The ensuing market volatility has derailed a number of in-train deals including the sale of NZ property fund, Augusta Capital, to the Australian firm, Centuria Capital, and the sale of NZX-listed Abano Healthcare to private equity firm BGH.
Early this month, Australian fund research house, Zenith Investment Partners, also tried to back out of an agreement to purchase Chant West Holdings. Zenith, which owns NZ researcher FundSource, was itself bought by Australian private equity firm, Five V Partners, this January for a rumoured $30 million plus.
While cementing a deal in the current environment would be tricky, AMP NZ said in a statement: “We’re continuing to work through the divestment process and will provide a further update at or before our half-year results in August.”
AMP NZ has about $12.8 billion in funds under management (roughly half in the AMP KiwiSaver scheme plus $3 billion or so in both its corporate super and retail product range) and 60-odd financial advisers, shared about equally between the house brand and AdviceFirst.
Meanwhile, a recent Morningstar report tips overall AMP profit to fall further in the short term before turning the corner from the 2022 financial year.
The COVID-19 crisis conditions “are not conducive for AMP, which is likely to see reduced earnings from lower investment markets, client risk aversion, less residential housing turnover, and further mortgage arrears”, Morningstar says.
“However, we expect the virus-induced downturn to be only temporary and forecast profit growth from fiscal 2022. We expect investment returns, client flows and bank margins to revert higher over the medium term; corresponding with an expected recovery in financial markets and economic growth after the pandemic.”
The sale of AMP’s life insurance division to Resolution Life, still on track to close by the end of June, would add further balance sheet strength to help weather the storm, the Morningstar report says.