Why the AMP (ASX:AMP) share price could be set to rocket higher today

The AMP Limited (ASX: AMP) share price could be set to rocket higher this morning after it confirmed takeover rumours with Ares.

| More on:
Man drawing illustration of a big fish eating a little fish representing a takeover or acquisition.

Image source: Getty Images

The AMP Limited (ASX: AMP) share price could be set to rocket higher this morning on takeover reports.

Management confirmed that Ares Management Corp Class A (NYSE: ARES) lobbed a bid to the entire embattled wealth manager.

But shareholders (including myself) will need to pinch ourselves to stop from getting too excited. The takeover proposal is indicative and non-binding.

Further, AMP didn’t disclose how much Ares may be willing to pay.

AMP share price in M&A spotlight

However, I know it’s a decent offer as management is engaging with the suitor, even though AMP said these negotiations are “very preliminary”.

Is AMP trying to set expectations low? The Australian Financial Review reported that things may not be so preliminary as AMP is allowing the bidder to look under the hood as part of the due diligence process.

The article even described both parties to be in “advanced talks” and highlighted the interconnections between senior management at AMP and Ares. It seems that many were ex-colleagues from Swiss investment house Credit Suisse.

Better to be sold than fixed?

This doesn’t mean a deal is guaranteed, of course. But it certainly would be seen to improve the probability of a deal being consummated.

Even so, AMP is quick to point out that it’s received “significant interest” from other parties for all or parts of its business.

The scandal-plagued AMP is undertaking a portfolio review as it tries to restructure the business. It recently sold its life insurance arm and experts believe it will need to shrink to greatness if it has any hope of restoring its former glory someday.

AMP share price is far from heyday

The AMP share price collapsed by nearly 80% over the past five years when the S&P/ASX 200 Index (Index:^AXJO) jumped close to 16%.

Others in the sector are also faring better. The Perpetual Limited (ASX: PPT) share price “only” shed 38% while the Magellan Financial Group Ltd (ASX: MFG) share price surged 155% over the period.

Foolish takeaway

The AMP share price takeover approach shouldn’t surprise readers on this site. It was only two-days ago that I wrote about potential suitors running the ruler over the group.

I suspect we will be seeing more takeovers and asset sales over the coming months too. Other possible candidates include the struggling Boral Limited (ASX: BLD) share price and Suncorp Group Ltd (ASX: SUN) share price.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

Brendon Lau owns shares of AMP Limited. Connect with me on Twitter @brenlauThe 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.

More on Mergers & Acquisitions