AMP share price sinks amid latest Collimate deal news

The AMP share price is trading lower on news it has sold its Collimate real estate and domestic infrastructure business.

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Key points

  • The AMP share price is sliding on Wednesday after the company announced it has agreed to sell its real estate and domestic infrastructure business
  • If all goes to plan, the business will soon be in the hands of real estate investment company Dexus for a cost of up to $1 billion
  • AMP will now focus on selling its international infrastructure leg, which reportedly has a buyer in the net

The AMP Ltd (ASX: AMP) share price is dropping on Wednesday after the company confirmed the sale of the Collimate Capital real estate and domestic infrastructure business.

The business – along with its potential $1 billion price tag – will be picked up by Dexus Property Group (ASX: DXS).

Confirmation of the sale comes one week after the companies confirmed they were discussing the business, which was previously earmarked to be demerged.

At the time of writing, the AMP share price is $1.03, 0.48% lower than its previous close.

That's a better performance than that of the broader market on Wednesday. Right now, the S&P/ASX 200 Index (ASX: XJO) has slumped 0.78%.

The S&P/ASX 200 Financials Index (ASX: XFJ) is also trading lower today, slipping 1.26%.

AMP share price falls as Collimate sells

The AMP share price is trading lower on news Dexus will purchase part of Collimate's real estate and domestic infrastructure business.

Dexus will buy the business – which houses $31 billion of assets under management (AUM) ­– for an upfront $250 million cash payment.

AMP may also see a $300 million payday in the form of an earn-out agreement.

The earn-out is subject to the retention of the business' AUM over the nine months following the sale.

Though, AMP doesn't believe it will bank the full $300 million fee. It expects the business' AUM to dip by around $3 billion.

Finally, Dexus will purchase AMP's existing and committed sponsor stakes in the platform, worth $180 million and $270 million, respectively.

That portion of the agreement is expected to cost the real estate investment company $450 million, subject to third-party discussions.

The funds will be used to pay down AMP's debt and conduct a capital return – for which it will need regulatory and shareholder approval.

AMP will hold onto its 24.99% stake in PCCP and sponsor stake in PCCP Fund VIII following the sale.

The embattled financial services company will now be focusing on the sale of Collimate's international infrastructure equity business.

Several entities have shown interest in acquiring the business, which holds $9 billion of AUM.

But, according to reporting in The Australian, the main contender to take over the international infrastructure leg is United States firm DigitalBridge Group.

What did management say?

AMP CEO Alexis George commented on the sale:

In Dexus we have found a strong owner for the real estate and domestic infrastructure equity businesses, which will add significant value through their strong track record and experience in real estate and asset management. Their depth of talent will strongly complement our specialist teams.

AMP share price snapshot

Today's dip hasn't been enough to push the AMP share price into the long-term red.

Right now, the financial services provider's stock is trading 3% higher than it was at the start of 2022.

Though, it has slipped 8% since this time last year.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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