The AMP Limited (ASX: AMP) share price has risen another 7.8% today, following the company’s best 1 day share price rally in 15 years on Friday. The AMP share price is responding to confirmation of the size of the bid from Ares Management Corp Class A (NYSE: ARES). The company confirmed the takeover proposal implies a value of $1.85 a share. This values the company at approximately $6.36 billion and is a 20% premium on Friday’s closing price.
However, AMP went on to emphasise that this was a preliminary proposal. Moreover, there was no guarantee a transaction would happen at all. In fact, Ares Management, in a release to the United States Securities and Exchange Commission, echoed this sentiment: “The diligence and discussions are very preliminary and there is no certainty that any transaction will occur on the proposed terms, within any particular time frame, or at all.”
Is this the best option for AMP?
Allan Gray is AMP’s second largest shareholder. As reported by the Australian Financial Review (AFR), Allan Gray portfolio manager Simon Mawhinney believes that the break-up value is large: “Whatever happens I think it will be split into various parts. We are not strategic holders and would sell for the right price.”
Hamish Carlisle of Merlon Capital commented: “For us it‘s down to which approach maximises shareholder value and that could be a buyout of all of the company, sales of the parts, or a buyback and spin-off of AMP Capital,”
Alan Kohler writes in The Australian: “AMP is going to be broken up. That was always going happen as soon as the Hayne royal commission brought down the final curtain on conflicted financial advice, although the writing was on the wall after commissions were banned in 2012.”
Since the moment AMP announced a company review, there have been suitors for its AMP Capital business. Enticed further by the low AMP share price, 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 potentially interested.
Meanwhile, the market is waiting to see if any other parties will declare a hand.
The end game
Kohler continues that there is a lot of potential if AMP can incite an auction between interested parties, indicating he believes that bids could go higher. Building on this theme, the Chanticleer column in the AFR believes that AMP has now declared a foundation for future bids. The AMP share price will be in focus over the next few weeks as this dynamic situation continues to unfold.
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Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends KKR. 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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