Is Wesfarmers Ltd about to make a bid for AMP Limited?

Retail conglomerate Wesfarmers Ltd (ASX: WES) is reportedly eyeing up insurer and financial service company AMP Limited (ASX: AMP).

The Australian newspaper claims that the conglomerate has started inquiries in to the true value of AMP. The paper reports that Wesfarmers recently dropped its push for a financial licence, adding to the speculation that it will gain a licence by acquiring a business that already has one.

Wesfarmers-owned Coles has been rolling out insurance products, as well as other financial products such as credit cards and personal loans. The acquisition of AMP would give Wesfarmers the ability to roll out a whole suite of financial products to its supermarket customers, and is reminiscent of UK retailer Tesco, which counts a fully-fledged bank as one of its businesses.

The sale of Wesfarmers underwriting business to Insurance Australia Group Ltd (ASX: IAG) also appears to pave the way for a tilt at AMP. The Australian reports the move may be a way of preventing competition concerns the Australian Competition and Consumer Commission (ACCC) may have had, should Wesfarmers buy a financial business such as AMP.

The paper suggests Queensland-based financial services company Suncorp Group Ltd (ASX: SUN) could also come under the microscope.

But Wesfarmers CEO Richard Goyder told reporters today that he won’t be commenting on speculation like that. He did note that international expansion was a risk, but was always on the lookout for opportunities.

“We are pretty pragmatic and would have to be convinced that it’ll be a good opportunity for our shareholders,” he said.

Australian companies don’t have a great record of international expansion, unless you count the likes of Computershare Ltd (ASX: CPU) or Flight Centre Travel Group Ltd (ASX: FLT). Both of those companies have managed to expand their operations beyond our shores very successfully.

AMP shareholders may well be hoping for a takeover, give the rather dismal returns to shareholders over the past decade of 5.5% per year. AMP shares were up 1.6% at $5.74 at the close of trading, while Wesfarmers shares had gained 1.3% to $43.92.

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Motley Fool writer/analyst Mike King owns shares in Flight Centre Travel Group. You can follow Mike on Twitter @TMFKinga

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