With the release of its 2020 full-year results, AMP reported that on Tuesday night, Ares had backed out of its previous offer to acquire all of AMP at $1.50 a share.
The two are still in talks, but now centred on AMP’s most profitable business, its asset manager, AMP Capital. AMP has said it is reviewing options for the future of the business, which include potential partnerships.
Chief executive Francesco De Ferrari commented Ares had conducted a long and comprehensive due diligence process on the group, evaluating a complex beast with a 170-year long legacy. During a media briefing on Thursday morning, he gave constrained answers to questions around the talks.
“Now as to why Ares withdrew their conditional proposal, I can’t really talk for them,” he said.
“But you know, their core capability really is in the asset management space. They have a lot of complimentary skills with our asset management business and we are continuing, as we announced, to engage them constructively on their interest for AMP Capital.”
The AMP share price took a hit with the announcement, travelling from $1.54 on Wednesday afternoon to $1.40.
The last CEO of the investment arm, Boe Pahari, had a brief stint in the role last year before previous sexual harassment allegations against him came to light. Since then, Mr De Ferrari has taken on the role of acting CEO for AMP Capital, with former Cbus boss David Atkin working as a deputy chief.
Mr Atkin is booked in an interim capacity until mid-year, which Mr De Ferrai commented, will give the company time to complete its portfolio review and to determine the future of AMP Capital. Yet the likely time frame for the continuing discussions with Ares is hard to pin down, with there being complex processes involved.
AMP is still seeking to maximise the growth of AMP Capital, plodding along on its growth strategy it rolled out in August, when it reclaimed full ownership of the business and bought out Mitsubishi UFJ Trust and Banking Corporation’s 15 per cent stake.
The plan has been to repivot the AMP Capital’s focus towards private markets, building on its infrastructure and real estate investment capabilities.
For the remaining banking, wealth management and New Zealand wealth businesses, AMP is deciding to persist with its ongoing transformation strategy after completing its portfolio review into each of the segments.
“The whole portfolio review exercise, given the inbound interest, was really set up to test if there were better ownership options for each one of our businesses,” Mr De Ferrari said.
“And we benchmark them versus our own internal strategy and what it can deliver. And so based on the discussions and where we landed, we effectively decided that for our Australian business, which is wealth management and the bank, and for New Zealand, effectively… continuing to drive our strategy is the best outcome for shareholders.”
In advice, Mr De Ferrari reported the group is 75 per cent of the way through the overhaul of its aligned practices. Through the program, AMP has approached advisers it felt were not meeting its required criteria or were not sustainable, with the options of selling their business back or merge with larger practices.
Across the core licensees, the group had 1,573 remaining advisers at the end of December – a 26.1 per cent fall from the year before and 39 per cent from 2018. The number of practices has declined even more sharply, down by 37 per cent in the 2020 year to its current total of 595.
The drop-off in numbers has nearly all been driven by AMP’s advice reshape program, the CEO said, a “deliberate effort” to ensure the group has a complaint and sustainable network.
Mr De Ferrari has claimed success however, as the average assets under management (AUM) per practice have risen by more than 40 per cent in 2020. Total AUM across the core licensees came to $88.3 billion, a 10.1 per cent drop year-on-year.
Both AMP Capital and the Australian wealth businesses had seen declines in assets under management (AUM) through volatile conditions and the COVID crisis, which created the largest knock-on effects for the group’s earnings.
AMP’s underlying net profit for the year was $295 million, a 32.8 per cent drop from 2019.
In the wealth segment, AUM declined by 8 per cent to $124.1 billion, while AMP Capital copped a 7 per cent fall to $189.8 billion.
AMP Capital’s performance and transaction fees were down 39 per cent or $33 million compared to the year before, reflecting the COVID impact.
Sarah Simpkins
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
