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AMP Plans Private Markets Spin-Off After Ares Talks Fail

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Matthew Burgess
·3 min read
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(Bloomberg) -- AMP Ltd. is splitting off its private markets business after Australia’s oldest wealth management firm ended talks about a possible sale to Ares Management Corp.

The months-long discussions with Los Angeles-based Ares have now concluded, AMP said in a statement Friday. Instead, the demerged entity of AMP Capital’s infrastructure and real estate units will be listed on the Australian stock exchange. As part of the separation, Boe Pahari, who was demoted last year from his position atop the investment management unit after a sexual harassment scandal, will leave the business.

The decision provides some clarity for investors after a tumultuous period for the firm left its shares trading near an all-time low. AMP Ltd., to be run by Alexis George from the third quarter of 2021, will retain a stake of up to 20% in the spun-off firm, that will continue to be led by David Atkin amid an international search for a new chief executive officer.

“It’s a real chance to really start fresh,” Jessica Amir, a market analyst at Bell Direct, said by phone. “The funds management industry is completely different to financial advice. Two separate businesses, two separate futures, so it’s a real fork in the road and a real opportunity for change.”

AMP shares all but erased an early 8% gain in Sydney trading Friday to close less than 1% higher. The stock has tumbled 27% this year.

Ares earlier this year scrapped a A$6.4 billion ($4.9 billion) takeover offer for the entire company as the wealth unit continued to struggle and instead had offered to pay A$1.35 billion for a 60% stake in the private markets business.

The spin off is expected to be completed in the first half of 2022. Having concluded the review of AMP’s portfolio, the board will start a share buy-back of up to A$200 million.

“We have had substantial and constructive discussions with Ares regarding a sale, however, we have not been able to reach an agreement that would deliver appropriate value for our shareholders,” AMP Chair Debra Hazelton said in the statement. “The board has therefore concluded a demerger provides investors with the strongest value outcome, creating two more focused entities, with the agility to pursue new growth opportunities in their respective markets.”

Simple Structure

The private markets unit will put in place a new management equity plan in an attempt to attract and retain a high quality investment team, according to the statement. The demerger will simplify its structure and allow it to establish a new brand, the statement said.

To be sure, there’s “a great deal of uncertainty” around AMP Capital given clients continue to pull cash, while the wealth management unit is facing profitably issues, UBS Group AG analysts led by Andrew Adams wrote in a note to clients. Shareholders will also have to pay the separation costs, pay down debt and likely another major cost cutting program, he wrote.

“Further capital management, which was a big part of the positive AMP thesis, now looks unlikely,” according to the note. The spin-off is “a less than ideal outcome.”

(Updates with closing shares in fifth paragraph)

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