AMP has discontinued negotiations with Ares Management for the sale of its Private Markets entity and will instead list the business on the ASX, leaving AMP Limited to focus on its retail channels and the remaining elements of AMP Capital.
AMP Limited will now consist of the licensee groups that make up its wealth management business, as well as its investment and banking entities. AMP Limited will also retain AMP Capital’s Multi-Asset Group (which will fold into banking and wealth division AMP Australia), a 20 per cent stake in Private Markets and the Global Equity and Fixed Income (GEFI) business, which is being prepared for sale.
“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,” AMP stated this morning. “Private Markets will also put in place a new management equity plan, to attract and retain talented investment professionals and management.”
The demerger puts AMP’s retail arm at the centre of its business, and could be seen as an indication of its intent to retain and support its wealth management division under new AMP Capital chief executive Scott Hartley, who has been active in addressing AMP’s future business model with advisers.
As part of the business restructure AMP Capital will part ways with controversial global head of infrastructure equity and North West region, Bo Pahari, who AMP states “has decided to leave the business”.
According to AMP chair Debra Hazelton, the company had “substantial and constructive” discussions with Ares, but was unable to get a deal across the line that would deliver enough value for 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,” she said.
The business split made sense given the nature of the client bases and the potential for each moving forward, Hazelton continued.
“Our portfolio review confirmed that AMP has two distinct businesses in retail wealth and institutional private markets, with different client bases and growth opportunities,” Hazelton commented. “From the extensive work that has been done we believe that operational and structural separation will significantly benefit both business units.”
The targeted timeline is for the demerger to be completed in the first half of 2020.
ANZ Deputy CEO Alexis George, who recently was named as the incoming CEO of AMP after the resignation of Francesco de Ferrari, is due to join the business on July 1 this year.