There may be at least one winner in the AMP saga
AMP’s deal with a US private equity firm to buy AMP Capital’s private markets business is on the rocks.
AMP announced Friday that it had failed to reach terms with Ares after six months of negotiations. AMP announced that AMP Capital’s private markets business will be spun off and likely listed on the ASX under new management and branding, according to a report by The Sydney Morning Herald. AMP will retain a 20% stake in the business.
AMP also announced that controversial executive Boe Pahari will resign. Pahari was appointed chief executive of AMP Capital last year, but was swiftly relegated to his previous role as global head of infrastructure equity after allegations of sexual harassment emerged.
AMP insiders have told the AFR that they believe Bohari’s payout could well be in the region of $50 million, considerably more than his $6.5 million bonus in 2020. This sum includes termination payments and bonuses, but the vast majority will come from his carried interest in a number of AMP funds. The amount would be record-setting for Australia.
AMP said it would manage its private markets assets internally, but that it continued to seek a buyer for its global equity and fixed income business. Simon Mawhinney, chief investment officer at Allan Gray Australia - a major shareholder at AMP - said he was “very, very supportive” of the plan.
“This is the first time that AMP Capital can really be structured as a sustainable asset manager with an operating model that is essentially purpose-built,” Mawhinney told the Herald. “And I think this is better for everyone – it’s better for clients, it’s better for employees, I think it’s better for shareholders in the long term.”
However, Mawhinney said there was “absolutely no need” for AMP to retain a 20% stake in the new entity. He called on the company to fully divest.
Read more: AMP CEO ouster leads to slashed target price
Investors are divided over the news. Tribeca Investment Partners portfolio manager Jun Bei Liu said the market wasn’t terribly enthusiastic about the announcement, which she said obviously represented “plan B.”
“It won’t create a significant amount of capital,” Liu told the Herald. “I’m not sure it solves any problems for them. I think it will still represent a challenging environment. I’m just not sure what this business looks like.”
However, Morningstar analyst Shaun Ler told the publication that the ouster of Pahari would ease AMP’s “operational headaches” and allow the leadership team to get on with its simplification strategy.
“Private markets has been burdened by some negative connotations, such as the Boe Pahari risk and concerns around team stability, which affects their ability to grow,” Ler said. “All of this is distracting to AMP management.”
Liu, however, wasn’t convinced Pahari’s departure would be enough.
“Financial institutions require a lot of trust and stability, and it’s about people,” she told the Herald. “When you have that much disruption, it’s hard to see where the earnings are. With the trust and your clients leaving, it’s very challenging.”
Ryan Smith is currently an executive editor at Key Media, where he started as a journalist in 2013. He has since he worked his way up to managing editor and is now an executive editor. He edits content for several B2B publications across the U.S., Canada, Australia, and New Zealand. He also writes feature content for trade publications for the insurance and mortgage industries.LinkedIn | Email
