When AMP Limited (ASX: AMP) appointed a new chair, Debra Hazelton, she kicked off an asset portfolio review. This came on the heels of the company completing a $3 billion sale of its life insurance assets in July. AMP has made it clear that it is considering further asset sales after receiving many unsolicited bids. At the time of writing, many private equity firms are rumoured to be running the ruler over the troubled $4.6 billion company. In some cases they are considering specific parts of the business, like AMP Capital.
The AMP share price fell 5.2% over last week’s trading. This was largely due to the company reporting net cash outflows of $1.95 billion from its Australian wealth management arm during the September quarter. Over year-to-date trading, AMP has seen $6.35 billion in outflows.
Which companies are in the asset sale race?
A column in The Australian has placed private equity firm, Kohlberg Kravis Roberts (KKR) squarely in the frame, with the company believed to be working on a buyout proposal. What’s more, the private equity firm is currently completing the purchase of 55% of Colonial First State wealth management from Commonwealth Bank of Australia (ASX: CBA). Any potential acquisition would need to integrate with these assets in some manner.
Coincidentally, AMP’s problems have occurred at the same time the large banks are retreating from the wealth management businesses. Elsewhere in the sector, IOOF Holdings Limited (ASX: IFL) purchased MLC from National Australia Bank Ltd (ASX: NAB) for $1.44 billion. Nonetheless, KKR was also a potential suitor at the time. As a result, Westpac Banking Corp (ASX: WBC) remains the last large bank to sell its wealth management business.
Ms Hazelton committed to providing an update on the portfolio review by the end of the year. However, a real estate asset sale may occur sooner than that due to buyer interest. Recently, Vicinity Centres (ASX: VCX) was rumoured to have joined the fray in the hunt for the AMP real estate portfolio. DEXUS Property Group (ASX: DXS), Lendlease Group (ASX: LLC) and Charter Hall Group (ASX: CHC) are among other companies mentioned.
While there are many rumours at play, it is uncertain exactly which way the management of AMP will proceed. Subsequently, there has been a lot of speculation about the asset sale of the company’s real estate portfolio. Yet, there remain persistent reports of approaches for either the AMP Capital assets, or for the entire company.
Moreover, the Australian Competition and Consumer Commission (ACCC) has remained silent on the potential for consolidation.