The Australian Financial Review (AFR) is reporting this morning that leading insurer and financial services provider AMP Limited (ASX: AMP) could be viewed as a takeover target.
In many ways it's not really surprising that AMP, one of Australia's largest blue chip companies is being touted for a shake-up given its disastrous performance for shareholders. Compared with the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) which has returned 40% over the past five years, AMP's share price has gained just 7%. While over the past decade, including dividends its total shareholder return has been a meagre 5%.
When it comes to natural owners of AMP, banking and insurance firm Suncorp Group Ltd (ASX: SUN), which has a market capitalisation at around $18 billion (compared with AMP's $16 billion) could be an acquirer, as could one of the major banks but neither option seems likely. Alternatively, private equity could make a play, however more realistic would seem to be the potential for a large multi-national looking for an immediate footprint in Australia and New Zealand to be a logical buyer.
What to do…
While some investors live by the mantra "buy the rumour, sell the fact", an appraisal of AMP's valuation is a more sensible approach to deciding the merits of an investment opportunity. With the stock trading on a forecast price-to-earnings ratio of 14.8, the stock is cheaper than many of its listed financial services peers, however regard needs to be given to AMP's insurance operations.
