The AMP Ltd (ASX: AMP) share price is pushing higher on Friday morning.
At the time of writing, the financial services company’s shares are up 3% to $1.16.
Why is the AMP share price pushing higher?
According to the release, the company intends to pursue a demerger of AMP Capital’s Private Markets business of infrastructure equity, infrastructure debt and real estate.
Management explained that the proposed demerger follows a decision by the AMP Board to conclude discussions with Ares Management Corporation regarding a potential sale of Private Markets.
What will the demerger look like?
The release explains that the demerger would create two focused businesses, better equipped to pursue and allocate capital to distinct growth opportunities and realise efficiencies.
AMP Limited will be a retail-focused, wealth management, investment and banking group with scale and market-leading positions in the Australian and New Zealand markets and strategic investments in key international partnerships.
It will also retain a minority stake in Private Markets of up to 20% to participate in the future growth of the business.
Furthermore, it will retain AMP Capital’s Global Equity and Fixed Income (GEFI) business for at least the time being. AMP is currently exploring sale or partnership options for this business.
Similarly, it will be home to AMP Capital’s Multi-Asset Group, which is in the process of being transferred to the AMP Australia business
Whereas the new Private Markets business will be a leading global private markets investment manager with a strong performance track record in differentiated asset classes of infrastructure equity, infrastructure debt and real estate, and capabilities to expand into attractive growth adjacencies.
In addition, management believes the proposed demerger would unlock further value in the Private Markets business by simplifying its structure, providing operational independence and enabling it to establish a new brand. Private Markets will also put in place a new management equity plan, to attract and retain talented investment professionals and management.
“Significantly benefit both business units”
AMP’s Chair, Debra Hazelton, commented: “Our portfolio review confirmed that AMP has two distinct businesses in retail wealth and institutional private markets, with different client bases and growth opportunities. From the extensive work that has been done we believe that operational and structural separation will significantly benefit both business units. The Private Markets business operates in growing, global markets in which investment management talent and strong client relationships are critical. While AMP Australia and New Zealand Wealth Management share the same commitment to clients, they are predominantly domestic businesses focused on wealth, banking and investment solutions for retail customers.”
“Through our review, we assessed the alternatives of a sale or separation for Private Markets and found both options would support the acceleration of growth in the business. We have had substantial and constructive discussions with Ares regarding a sale, however, we have not been able to reach an agreement that would deliver appropriate value for our shareholders. The Board has therefore concluded a demerger provides investors with the strongest value outcome, creating two more focused entities, with the agility to pursue new growth opportunities in their respective markets. We will now accelerate our demerger planning, building on the preliminary work already undertaken.”