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AMP (ASX:AMP) share price on watch as second buyer for its asset could emerge

Looking through magnifying glass

The AMP Ltd (ASX: AMP) share price could find support on rumours that it has attracted another buyer for its assets.

The AMP share price dipped 0.4% to $1.44 this morning when peers like the Magellan Financial Group Ltd (ASX: MFG) share price and Janus Henderson Group CDI (ASX: JHG) share price tumbled by more than 2% each.

The word is that Challenger Ltd (ASX: CGF) is sniffing around the assets that Ares Management Corp Class A (NYSE: ARES) doesn’t want, reported the Australian Financial Review.

Challenger’s interest could support AMP’s share price

Ares and AMP are looking at striking a $2.25 billion joint venture agreement that would contain AMP Capital’s private markets businesses.

AMP is looking at options for its public markets businesses, and that’s where Challenger comes in.

Challenger is speculated to be running the ruler over AMP’s global equities and fixed income units, reported the AFR without citing sources.

Bolt-on acquisition

Swallowing these divisions would give Challenger a quick way to bulk up and to cement its industry leadership position.

Challenger had $96.1 billion in assets under management (AUM) at the end of December last year. AMP public markets businesses reported having $135 billion under management at the same period.

But AMP’s AUM figure included its ASX shares, fixed interests and multi asset group businesses too.

Competitive tension could lift AMP’s valuation

If the rumours are right that Challenger is keen, the AFR believes that Perpetual Limited (ASX: PPT) would also be watching AMP closely.

Nothing like having a bit of competitive tension to get AMP shareholders’ blood pumping!

Analysts estimate that AMP’s public markets businesses could be worth between $500 million and $1 billion.

Patience needed

However, any bids for AMP’s public markets assets are only likely to emerge after Ares makes a decision on the JV.

If the marriage is consummated, AMP will get a $1.55 billion cash injection from the US group, which will control 60% of the JV.

The JV will include AMP’s infrastructure equity and infrastructure debt, real estate and other minority investments.

Investors will have to wait till end of this month to find out what happens next as both have signed an exclusive 30-day deal to test the waters.

Foolish takeaway

Ares has left AMP standing at the alter before when it walked away from a proposal to acquire the entire wealth manager.

Securing the JV could also help AMP strengthen its position when negotiating the sale of its public market assets.

Hopefully it will be second time lucky for the embattled AMP share price.

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Motley Fool contributor Brendon Lau owns shares of AMP Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Challenger Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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