The AMP Ltd (ASX: AMP) share price could attract some excitement this morning after it announced a potential joint venture (JV) with Ares Management Corp Class A (NYSE: ARES).
Ares left AMP standing at the alter when it snubbed the opportunity to buy all of AMP. But the ASX company is desperate for some lovin’ as the AMP share price tumbled when Ares walked away.
The two parties may have found a new way forward after they signed a non-binding Heads of Agreement to form a $2.25 billion JV.
AMP’s share price to get $1.6bn boost from JV
The JV will hold AMP Capital’s private markets businesses. This includes infrastructure equity and infrastructure debt, real estate and other minority investments.
If the deal goes through, AMP stands to get a $1.55 billion cash injection before associated costs. Not a bad second prize as the cash represents a third of AMP’s current market capitalisation.
Under the proposed deal, Ares will own 60% of the JV and will have management control. AMP believes this is the best way forward after it failed to find another suitor to lob a full takeover of the embattled wealth manager.
Is AMP’s joint venture with Ares good news?
The rational is that AMP will get a big cash boost, and could potentially fund another special dividend or capital return. AMP’s private markets business is also likely to grow faster under the stewardship of Ares due to its global reach and the extra economies of scale.
Ares had US$197 billion ($250 billion) in assets under management at the end of December 2020. Of that, it managed US$18.3 billion in infrastructure and real estate AUM with over 100 investment professionals in North America and Europe.
AMP shareholders will be able to benefit from the expected accelerated growth in the JV though AMP’s 40% ownership.
Other ways to unlock value in AMP’s share price
Both parties will work exclusively to sign a binding deal over the next 30-days and AMP is free to explore options for its public markets assets that aren’t included in the JV.
One should think there is some value there. AMP Capital’s public markets business made a modest but positive contribution to the group’s net profit in FY20.
These assets include the Multi-Asset Group, which is being restructured and absorbed into AMP Australia, and the Global Equities and Fixed Income (“GEFI”) business. AMP is open to selling the latter two or forming partnerships.
Glass half-full outlook
“We expect [the JV] would strengthen the business and significantly accelerate our strategy to grow private markets, while de-risking our international expansion plans,” said AMP’s chair Debra Hazelton.
“The transaction will enable AMP to increase focus on the transformation of our wealth management business in Australia, drive the continued growth of AMP Bank and New Zealand wealth management and benefit from driving further efficiency.”
AMP shareholders like myself will be keeping our fingers crossed!
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