AMP Limited (ASX: AMP) shares are surging today after the company provided an announcement this morning regarding takeover talks with Ares Management Corp (NYSE: ARES). At the time of writing, the AMP share price has surged 20.31% to $1.54. This came after AMP advised in an ASX announcement that it has indeed received a “non-binding, indicative, and conditional” proposal from the US private equity fund. However, it was also quite explicit that these were preliminary talks, and that the AMP takeover may not take place.
The Australian believes the scale of the deal is $6.4 billion with an indicative share price of $1.85.
Anatomy of the AMP takeover
Many of the chief players in this drama are part of a small circle. Ares Management has hired the ex-Credit Suisse Group (NYSE: CS) chief to run its Australian operations. Credit Suisse represents AMP along with Goldman Sachs Group Inc (NYSE: GS). Moreover, ex-CEO, now head of AMP Capital, Francesco de Ferrari, is also an ex-executive director of Credit Suisse. Additionally, The Australian has revealed that Ares Management is looking for space in Chifley Tower, near the AMP headquarters.
However, it is the final paragraph of the AMP statement that raises questions.
…AMP has received significant interest in its assets and businesses and is assessing a range of options in a considered and holistic manner, including continuing to pursue its three-year transformation strategy, with a focus on maximising shareholder value.
As the report in The Australian went on to point out, there is a chance that AMP will stay in one piece. Furthermore, the ability for it to sell off specific businesses, or embrace a total break up cannot be ruled out. While we do know that Ares Management is in the data room for due diligence purposes, we do not know if there is anybody else there. Nor do we know exactly what they are reviewing.
Since the moment AMP announced a company review, there have been suitors for its AMP Capital business. These have included market players like Macquarie Group Ltd (ASX: MQG), US equity fund KKR & Co Inc (NYSE: KKR), DEXUS Property Group (ASX: DXS), and Vicinity Centres (ASX: VCX). Even Magellan Financial Group Ltd (ASX: MFG) was mentioned as a potentially interested party.
With the first non-binding bid now out in the open, this drama has definitely moved beyond the opening act. However, from the wording on the statement, it is clear that it is still far from over. Today, the AMP share price is trading at $1.54. Yet five years ago it was trading at $5.73 for virtually the same company, except without its life insurance business, something opposed by key institutional shareholders.
However, there has also been a lot of bad road travelled since then. The Hayne Royal Commission, underperformance, sexual harassment scandals, disarray in leadership, a revolving door on the chair position. The list goes on and has, understandably, been reflected in the falling AMP share price. While the company still may go ahead under its own steam, there is a chance that this is the final act. If so, then the board is duty bound to try to achieve the greatest value for shareholders, whether this involves a sale or breakup.
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Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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