The AMP Limited (ASX: AMP) share price is up 5.37% on Friday following an article published by The Australian last night. The article suggests that AMP, which has recently been flagged as a potential takeover target for Macquarie Group Ltd (ASX: MQG) and other financial services giants, is being watched by private equity. This comes as the AMP share price has seen dismal performance over the last few years.
What will a private equity takeover mean for AMP shareholders?
If a private equity takeover goes ahead, it will most likely mean that AMP shareholders will receive a cash payment for their shares. This would usually come at a premium to the market price, which currently sits at $1.87. Given that there is currently more than one suitor, this could suggest that potential buyers may need to bid higher in order to gain approval from AMP shareholders.
Currently, AMP appears to be preparing a defence. It has used an exemption to the Corporations Act 2001 to buy up AMP shares through a subsidiary. Previously, it had been disposing shares. If a takeover offer is mounted, this subsidiary's voting power could reduce the likelihood of success.
How has AMP performed lately?
In March, AMP withdrew its guidance for the 2020 financial year. However, it did announce that its liquidity and capital position remained strong. In 2019, AMP experienced a net loss of $2.5 billion as it wrote down the value of assets and some of its investments. Underlying profit in 2019 was $464 million.
AMP is soon to sell its life insurance business. As reported at the company's annual general meeting last month, the proceeds from this will be used to fund the company's strategy with surplus funds potentially being distributed to shareholders if conditions are favourable. Currently, AMP appears to be focused on its current strategy of creating a leaner business while improving its wealth management and AMP Capital businesses.
About the AMP share price
The AMP share price has recovered 73% from its 52 week low of $1.08, however, year to date it is still down by around 3%. AMP shares are down 10% since this time in 2019, reflecting the tough economic conditions as a result of the coronavirus pandemic. Longer-term, its share price has dropped 70% since 2015.
However, as takeover speculation mounts there is likely to be upward pressure on the share price. If media reports are correct, AMP is becoming the latest takeover target for 2020.
