AMP had attracted at least three offshore bidders for its NZ wealth management business as the offer deadline closed out last week, Australian press reported, although the price and buyer interest could be falling by the day.
The Australian Financial Review (AFR) added Macquarie Group to a previously reported short-list of AMP NZ window-shoppers that included US private equity firms TA Associates (part-owner of Fisher Funds) and KKR.
Bain Capital left the deal table in round two, the AFR says.
Local sources suggest Mercer and Kiwibank (or associated entities) could also be among contenders for the AMP NZ wealth business. According to the AFR, analysts valued the AMP NZ wealth division at about $400 million – at the lower end of a range understood to have originally topped out at $500 million.
While binding bids for the NZ business were due last week, the AFR says current market turmoil could yet derail the deal.
“Sale processes are dropping like flies as bidders walk away and/or fail to meet vendor price expectations,” the AFR story says.
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.
Over the last 18 months, AMP NZ has formally cut ties with the life insurance business (sold to Resolution Life last year), from which it emerged about 165 years ago.
But in a further complication, the NZ wealth sale may also hinge on AMP completing the Resolution deal that has struck some last-minute resistance.
After an initial stumble last year over Reserve Bank of NZ (RBNZ) concerns, the complex AMP life arm purchase was due to finalise this June.
In recent weeks, however, the sale has come under pressure in NZ as critics raised alarm about potential loss of policy-holder rights.
Last Thursday, the RBNZ hosed down some of those concerns in a market update.
The RBNZ statement says, while it could not make detailed disclosures “we are able to assist policyholders’ understanding with some general comments about changes in ownership of an insurer”.
- a change of control does not change contractual entitlements of policyholders. Their terms and conditions are unaffected; and
- a change of control does not affect a policyholder’s right to enforce their contract if they consider their entitlements have not been met.”
Russell Hutchinson, Chatswood Consulting principal, said worries about the AMP life sale were overblown.
“There’s a willing seller that has said they can’t do the business justice and a willing buyer that feels they can,” Hutchinson said. “AMP and Resolution both agree that Resolution can do a better job.”
He said the business aims of Resolution were “reasonably aligned” with policy-holders and no better or worse than under AMP ownership.
In fact, Hutchinson said Resolution has told advisers it had a lower expected return on the business than AMP.
“And the claims that the regulator doesn’t have enough teeth to ensure Resolution respects the rights of policy-holders are absolute rubbish,” he said.
Hutchinson said the RBNZ demonstrated its power last year, requiring the deal to include $400 million of extra capital to back AMP-insured lives.
The RBNZ said last week it “cannot be specific about how long the approval process may take, or when approval will happen, if it does”.
“The time taken to make these deliberations reflects the quality of the information supplied by the insurer and the final form of the proposal,” the statement says. “The law requires that the Bank provide a decision within twenty working days of receiving all of the information that it reasonably requires. AMP Life / Resolution have set out a preferred timetable for the transaction to complete by 30 June.”
In other news across the Tasman last week, AMP Life and AMP Capital were hit with small fines – of A$275,500 and A$250,500, respectively – following a string of derivative transaction reporting breaches over 2015 to 2018.
The Australian Securities and Investments Commission (ASIC) said “the breaches arose out of administrative failings”.
“However, the duration of each of the reporting failures was significant and the time taken to identify them shows serious inadequacies in AMP Life’s and AMP Capital’s processes and procedures for monitoring the accuracy of their reporting,” ASIC said in a release.
AMP’s share price closed down almost 0.8 per cent last Friday at A$1.31.