After being circled by funds for 6 weeks since it put up the “for sale” sign, a private equity firm is confirmed to be in talks to buy AMP Ltd (ASX: AMP). US private equity firm, Ares Management, appears to have access to a data room for due diligence. This is a very strong signal that the board is willing to sell, after a 77.6% slide in the AMP share price over the past 5 years.
AMP consists of a bank, the financial planning business, and the AMP Capital funds management division. According to its website it has approximately $189.8 billion in assets under management (AUM). Its current market cap is $4.4 billion.
Could AMP see a bidding war?
The Australian Financial Review believes the US fund is preparing an offer north of $5 billion. Nonetheless, AMP appears to have many other suitors.
This comes amidst a tumultuous time for the wealth industry in Australia. The Hayne Royal Commission set this in motion after it brutally dissected the “fee for no service” scandal, ultimately leaving all four big banks determined to retreat from wealth management.
For instance, last week US equity firm Kohlberg Kravis Roberts (KKR) was believed to be working on a buyout proposal. This was after earlier abandoning an approach for AMP Capital. In addition, KKR is currently completing a 55% buyout of First Colonial, the wealth arm of the Commonwealth Bank of Australia (ASX: CBA).
Of all the banks, Commissioner Hayne was particularly scathing of AMP and its workplace culture, contributing to the decline of the AMP share price, until a sexual harassment scandal finally forced a reckoning.
About a month later, it had a new chair and launched a review of its business through two investment banks.
The AMP share price will be in focus once trading starts to see what investors make of this. To date, the wealth manager has been silent on news of the talks.
Nonetheless, AMP has over $149 billion in assets under management. The quality of the AMP assets, either individually or together, has generated a lot of interest. So too has the low AMP share price, and the willingness to sell all or part of the business. What happens next is anyone’s guess.
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Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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