All eyes will be on the AMP Ltd (ASX: AMP) share price on Tuesday.
This follows the release of an update on the financial services company's demerger plans.
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AMP share price on watch following demerger update
This morning AMP provided an update on its planned demerger and the strategic growth plans for the two post-demerger businesses – AMP Limited and AMP Capital's Private Markets business (PrivateMarketsCo).
According to the release, the company continues to make strong progress on the operational separation of PrivateMarketsCo, in preparation for a demerger during the first half of 2022.
Management notes that a clear perimeter has been set with the agreed sale of the Global Equities and Fixed Income (GEFI) business and transfer of the Multi-Asset Group (MAG) to AMP Limited.
Why is there going to be a demerger?
AMP revealed the rationale for the demerger. It is to enable the two businesses to increase focus on their respective markets and growth opportunities.
This will see AMP Limited operate as a retail wealth manager in Australia and New Zealand, and PrivateMarketsCo as a global manager of infrastructure and real estate investments with a growing focus on international institutional clients.
In respect to the latter, its strategy will focus on leveraging the significant opportunity to become a global leader in the fast-growing private markets industry.
It aims to achieve this by delivering autonomy through an effective separation and demerger from AMP, simplifying the business and organisation structure and achieving a run-rate cost base of A$300 million by FY 2023, growing its client base through a newly established global client solutions team and scaling its existing infrastructure and real estate investment strategies, and diversifying its product offering to clients. This includes potential new investment strategies structured to meet client specific interests globally.
As for AMP Limited, its strategy will focus on renewing purpose and values to put the customer at the centre, drive culture transformation, and reposition core capabilities to drive growth in banking and wealth platforms. Management also sees opportunities to make significant cost reductions and explore new avenues such as retirement and direct-to-consumer solutions.
Management commentary
AMP's Chief Executive, Alexis George, is optimistic on the future of the two businesses.
She commented: "In AMP Limited and PrivateMarketsCo we have two businesses with considerable growth opportunities, but which operate in very different markets, with different customers, and geographic focus. Separation and demerger will enable both businesses to accelerate their growth strategies, as well as simplify and improve efficiency."
"We see a significant gap in the market in retirement and have strong capability within our business to better serve this market. We also believe we can further scale our business by taking our products direct to clients," George added.
PrivateMarketsCo's Chief Executive, Shawn Johnson, added: "PrivateMarketsCo is a business that will thrive with greater focus and independence. Our team has built a strong track record in infrastructure and real estate – and has the capability to expand into new adjacencies and pursue further global growth opportunities, supported by increasing demand for private markets assets from investors around the world."
