AMP Says $2.3 Billion Life Unit Sale ‘Unlikely’ to Proceed

(Bloomberg) -- Australian wealth manager AMP Ltd.’s planned overhaul of its scandal-hit business is in tatters after the A$3.3 billion ($2.3 billion) sale of its life unit collapsed. The shares plunged to a record low.

The 170-year-old firm said Monday the deal with U.K.-based Resolution Life is “highly unlikely to proceed” because of challenges in meeting conditions imposed by New Zealand’s central bank.

The sale was a key part of AMP’s plans to re-position the business after becoming embroiled in a string of scandals exposed by an inquiry into misconduct in Australia’s financial industry, including charging wealth customers for services they never received.

AMP shares slumped as much as 18% in Sydney trading, hitting a record low of A$1.77. The stock has slumped 50% in the past year, slicing the company’s market to A$5.3 billion.

The Reserve Bank of New Zealand won’t approve the deal unless Resolution Life agrees to have separate, ring-fenced assets held in New Zealand for the benefit of policyholders there, an arrangement it said was inconsistent with its current branch structure.

“As a result, Resolution Life does not expect RBNZ to approve an application that would satisfy the condition,” it told AMP.

The deal’s failure is “exceptionally disappointing” as the sale “is a foundational element of AMP’s strategy,” the Sydney-based company said in a statement Monday.

AMP Likely to Get Less for Life Unit as Deal Crumbles: Macquarie

The two firms are now working to determine whether there is a solution, but a new deal is “not certain,” AMP said. If a revised deal can’t be reached, AMP intends to retain and manage the unit as a specialist life insurance and mature business.

Given the uncertainty surrounding the deal, AMP said it doesn’t expect to pay an interim dividend for the first half of fiscal 2019.

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