Ares Scraps $4.9 Billion Bid for Australia’s AMP; Shares Slump

AMP Ltd. may be forced to sell its business in pieces after Ares Management Corp. scrapped a A$6.4 billion ($4.9 billion) bid for Australia’s oldest wealth manager, sending shares tumbling in the latest setback for long-suffering investors reeling from years of scandal.

Ares told AMP that it doesn’t intend to proceed with its bid for the whole company after making an indicative offer last year, according to an AMP statement Thursday. The U.S. private equity firm is still interested in AMP Capital, the firm’s A$190 billion asset management unit that invests across unlisted real estate, infrastructure and global markets.

Chief Executive Officer Francesco De Ferrari said AMP remains “engaged” in discussions with Ares over the future of the asset management unit, and options include a potential partnership. He also said the asset was “interesting for a series of other parties.”

Ares abandoned its offer for the whole company partly because of concerns over the deteriorating performance of AMP’s wealth management business, according to people familiar with the matter. Earnings at AMP’s Australian wealth unit plunged 44% last year after investors withdrew A$8.3 billion of funds, the company said. De Ferrari said AMP had decided to retain the business.

AMP Capital is the company’s most prized unit, accounting for more than a third of underlying earnings. It’s one of the largest direct real estate investors in Asia with A$28 billion in assets and is building a skyscraper in Sydney’s Circular Quay. The business also manages infrastructure assets for third-party owners, and this is of particular interest to Ares, according to the people, who asked not to be identified as the matter is private.

Crown Jewel

Peter Gardner, a senior portfolio manager at Plato Investment Management, said it would be difficult for Ares to strike a deal with AMP’s CEO.

“AMP Capital is the jewel in the Crown of the AMP business,” he said. “Obviously if they offered him the price for the entire AMP business for AMP Capital, then potentially it would be right for him to do it.”

The collapse of the deal is a blow for shareholders seeking a quick, clean exit after Ares was given access to AMP’s books in October, having made an indicative offer of A$1.85 per share. The stock slumped as much as 11%, the biggest drop in more than six months. The shares were at A$1.37 at 3:50 p.m. in Sydney, giving it a market value of A$4.7 billion. The shares never traded above the Ares offer price.

A representative for Los Angeles-based Ares declined to comment.

The 172-year-old AMP effectively put itself up for sale last year when a sexual harassment scandal led to its second boardroom shakeout in two years, during which the stock lost about three-quarters of its value. It continues to focus on its three-year turnaround plan to cut costs and repair its reputation, damaged by revelations it charged fees to clients for services they didn’t receive, then lied to regulators about the wrongdoing.

What Bloomberg Intelligence says:

“AMP could explore options including selling its business units separately after Ares Management scrapped its buyout bid for 100% of the company. In the meantime, AMP may focus on resetting its business and rebuilding its reputation.” -- Sharnie Wong.

Separately, AMP on Thursday said underlying profit fell 33% to A$295 million in the year ended Dec. 31, the lowest in at least a decade as it contended with volatile markets, a mounting customer compensation bill and an exodus of customers.

For highlights from the earnings report, click here

In another blow to shareholders, AMP confirmed it won’t pay a final dividend for a second year. The board is committed to restarting initiatives to give cash back to shareholders in 2021, including buybacks, once the portfolio review has been completed and subject to the company’s performance, AMP said.

©2021 Bloomberg L.P.

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