Los Angeles-based investment firm Ares Management has lobbed a A$6.4 billion bid for the out-of-sorts AMP, according to Australian media reports, in the first shot of a likely bidding war.
The Ares “non-binding, indicative, and conditional” scheme-of-arrangement offer, confirmed in an announcement to the ASX on Friday, valued AMP at about A$1.85 a share, Australian press reported – above the end-of-week A$1.54 close price that itself represented an almost 20 per cent daily rise.
In a release to the ASX this morning (Monday November 2), AMP confirmed the A$1.85 per share offer price, noting “the preliminary nature of the proposal and discussions between itself and Ares, and that there is no guarantee that a transaction will eventuate and no certainty with regards to price”.
While the deal is far from done, Bloomberg columnist David Fickling says Ares could be getting AMP at a significant discount, likening the offer to buying the future earnings of Beyoncé for the price of Destiny’s Child in 2001.
Fickling says the focus on the struggling AMP wealth businesses has obscured the real value embedded in the group’s funds management arm, especially its infrastructure assets. AMP Capital has about $200 billion under management – about the same as the US-listed Ares – with an increasing tilt to higher fee-paying external investors, he said.
But if AMP Capital is the Beyoncé of the group, it has lost a bit of booty this year, culminating in the sexual harassment scandal that saw Boe Pahari demoted to his previous head of infrastructure role after brief few weeks as chief executive.
The furore has hurt AMP Capital, which since seen billions of dollars exit through closed institutional and wholesale mandates, including several in NZ.
Early in October AMP Capital NZ lost its largest client as sister wealth management firm announced a switch to passive investment, awarding BlackRock the job of managing up to approximately $9.5 billion in KiwiSaver and superannuation fund money in an arrangement due to start next June.
NZ, however, is way down the list of priorities for the Sydney-headquartered AMP. The fate of both AMP Capital NZ and the in-transition wealth management group here remain in the balance.
In the wake of the Pahari incident AMP chair, David Murray, also resigned, paving the way for his successor, Debra Hazelton, to put the company on the block.
The AMP ‘portfolio review’ has reportedly attracted numerous parties for a look-see including Macquarie, the Carlyle Group, KKR, Dexus and Magellan.
Largely unknown in these parts, the alternative asset manager Ares, founded in 1997, listed on the New York Stock Exchange in 2014. In January this year, Ares bought the Hong Kong-based private credit manager SSG Holdings.
At the time, Ares partner, Eric Vimont, said: “This transaction significantly builds upon our established Asian presence and will serve as a foundation for our future expansion.
“The region is the largest and fastest growing global market that we believe is characterized by structural market inefficiencies that are driving the capital needs for the underserved middle market.”
If AMP shareholders accept the Ares offer it would represent a relatively clean break from a messy recent past for the ASX-listed firm compared to selling off parts. Of course, as Fickling notes, Ares would still have some tidying up to do.
“To be sure, any buyer is going to have to decide what to do with those retail businesses,” he says. “It’s anyone’s guess when the tarnished image of AMP’s wealth management arm will recover. Meanwhile, its bank has a A$20.21 billion mortgage book that’s likely to suffer from a shaky pandemic-hit property market and net interest margins that are being squeezed by competition.”
Ares says in the ASX release: “Any potential transaction would be subject to a variety of conditions and structural considerations, including extensive due diligence, evaluation of divestiture of certain assets or non-core businesses, and may involve third party co-bidders. The diligence and discussions are very preliminary and there is no certainty that any transaction will occur on the proposed terms, within any particular timeframe, or at all.”
Formed in 1990 Destiny’s Child split in 2001 after a series of hits (including ‘Bootylicious’ and ‘Survivor’) with the three members – Beyoncé Knowles, Kelly Rowland, and Michelle Williams – pursuing solo careers. As at 2020, Williams and Rowland had accrued net worth of US$8 million and US$25 million, respectively.
According the ‘The Richest’ website, Beyoncé reported net assets of about US$500 million this year.