Shares in Scandal-Hit Wealth Manager AMP Jump 21% on Takeover Talks

(Bloomberg) -- Australian wealth manager AMP Ltd. has received a takeover approach from U.S. private equity firm Ares Management Corp., sending the shares surging and offering investors a clean exit after years of scandal.

The discussions are at a “very preliminary stage” and there is no guarantee of a deal, Sydney-based AMP said in a statement Friday. The shares jumped 20% at the close of trading -- the most in 17 years -- lifting the company’s market value to A$5.3 billion ($3.7 billion).

The 171-year-old firm effectively put itself up for sale last month after a sexual harassment scandal led to a boardroom shakeout, capping a torrid two years that saw the stock lose three-quarters of its value. For Los Angeles-based Ares, buying AMP, which manages about A$320 billion across pension savings, infrastructure and real estate, would be a quick way to scale up in Australian funds management, where it began offering its first investment products this year. A spokesman for Ares declined to comment.

If Ares does buy AMP, it will be on the firm’s own balance sheet and become part of its asset management business, according to a person familiar with the matter, who asked not to be identified because the information hasn’t been made public. The buyout firm has made an offer with enough of a premium to be granted due diligence, but it will be at least several weeks before Ares can refine its initial offer.

AMP said Friday it has “received significant interest” in its assets and businesses since hiring Goldman Sachs Group Inc. and Credit Suisse Group AG last month to review its portfolio. It will continue to assess a range of options, including pursuing Chief Executive Officer Francesco De Ferrari’s three-year transformation strategy.

AMP, which sold its life insurance arm to Resolution Life, now comprises Australian banking and wealth management, known as AMP Australia; AMP Capital, the A$190 billion funds manager and most-profitable arm; and New Zealand wealth management, where it’s trying to expand after scrapping plans to sell the unit in May.

What Bloomberg Opinion says:

Suppose the retail-focused wealth management business and bank turn out to be duds. Ares is still picking up a global infrastructure investor (AMP Capital) on the cheap, at a time when the prospects for such businesses look rosy. - David Fickling

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Long-suffering investors may prefer a quick, clean takeover rather than a messy and prolonged breakup. In August, Debra Hazelton replaced finance industry veteran David Murray as chairman, and the head AMP Capital was demoted as a sexual harassment scandal sparked the second boardroom shakeup in just over two years. AMP was also damaged by revelations it charged fees to clients for services they didn’t receive, then lied to regulators about the wrongdoing.

A buyout would also end AMP’s 22 years as a listed company. The firm, which started in 1849 as a mutual provident society owned by policyholders, listed on the stock exchange in 1998. The stock first traded at about A$36, at the time valuing AMP at around A$25 billion, and making it Australia’s third-largest company behind National Australia Bank Ltd. and the forerunner to what is now BHP Group Ltd.

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