Ares Management in talks to buy Australia’s scandal-hit AMP

Shares in AMP, one of Australia’s biggest financial groups, surged after a US private equity group said it was in talks to buy the scandal-hit wealth manager in a move that could trigger a bidding war.

Sydney-based AMP said on Friday that Los Angeles-based Ares Management, which manages about $179bn, had made a non-binding takeover proposal and preliminary discussions were taking place. Ares did not disclose the terms of its offer.

AMP shares closed 20 per cent higher in Sydney on Friday, pushing its market capitalisation up to A$5.4bn ($3.8bn).

There is no guarantee the offer would lead to a transaction, said AMP. The company noted it had received expressions of interest from other parties and AMP’s board has said that it would consider selling all or parts of the business.

Ares did not immediately respond to a request for comment.

AMP, a 171-year-old wealth manager with almost A$200bn under management, has been embroiled in multiple scandals over the past three years, including charging customers fees for no service and lying to regulators. The bad behaviour, which was exposed by a government commissioned public inquiry, led to the resignation in 2018 of the firm’s former chairman Catherine Brenner and chief executive Craig Meller.

In August, AMP chairman David Murray and another senior director resigned following investor pressure over the board’s handling of a sexual harassment case.

Mr Murray’s incoming replacement, Debra Hazelton, last month began a portfolio review that could recommend a change in AMP’s mix of assets and a possible break-up of the firm. The review followed deep disquiet from shareholders over AMP’s corporate culture and the damage to its reputation.

In the aftermath of the government’s inquiry, AMP suffered billions of dollars of outflows, as customers transferred their investments to rivals.

Allan Gray, one of AMP’s biggest shareholders with a 6 per cent stake, said the company looked “very, very cheap” following its difficulties and it was not surprising it had attracted suitors. AMP’s shares have plunged by nearly 70 per cent since early 2018.

Simon Mawhinney, Allan Gray’s managing director, said that any buyer would probably seek to sell off parts of AMP, rather than keep it intact, to maximise value.

However, he added that AMP was under no immediate pressure to sell itself despite its troubles and could focus on a “good old fashioned turnround” under its new management.

“It’s never too late to turn these . . . businesses around,” Mr Mawhinney said. “It just requires the will to do it and I think this may be the first time in many years that that has existed.”

Source: Financial Times