AMP shares plunged yesterday by more than 10% at the open after it told the ASX that US firm Ares had withdrawn its takeover proposal.
The shares opened at $1.54 and plunged to a low of $1.37, its lowest price since the Ares proposal was announced in October.
In a media briefing after the announcement was filed with the ASX, AMP CEO Francesco De Ferrari said he could not provide more details on why the deal had fallen apart.
“As to why Ares withdrew their conditional proposal, I really can’t talk for them,” he said. “The whole portfolio review exercise was set up to test if there were better ownership options for each one of our businesses,“ he told the media
AMP has now taken its wealth and bank arms, AMP Australia and AMP Bank, off the market and the firm is still talking to Ares over a potential new transaction that could see AMP Capital sold or part sold.
AMP’s share price is around 30% lower than when it launched its three-year strategy to cull unproductive advisers, improve technology and simplify super products in August 2019.
Mr De Ferrari said he would continue with the turnaround plan, pointing to the progress that had been made to date – even though he said there was still a long way to go.
Ares offered to buy 100% of AMP’s shares for $1.85 a share in an approach in October but after conducting due diligence, the firm has now withdrawn its offer.
That’s a telling admission and you have to wonder about the prospects for a deal on AMP Capital.
The shares closed down 11% at $1.37 yesterday which means investors do not think the possibility of $1.85 a share will come along any time soon.
Ownership of AMP Capital and its near $100 billion in assets may have been what Ares was after in its approach last year.
AMP reported its statutory profit for the 2020 year was $177 million, which reversed the $2.5 billion loss 2019 after the sale of its Life business and the huge outflow of clients and funds from the business in the wake of the disclosures – especially at the Hayne banking and finance royal commission – about the rotten way AMP had been treating many of its customers for years.
The outflows slowed in 2020, but still totalled nearly $2 billion.
The outflows were partly caused by $1.8 billion being withdrawn under the federal government’s emergency scheme that allowed Australians affected by the pandemic to cash-out part of their retirement savings.
The volatility caused by COVID-19 also contributed to profits falling in most of AMP’s business, including AMP wealth management (44%), AMP Bank (16%) and AMP Capital (32%).
Given those falls and the continuing uncertainty with COVID 19 and the vaccination rollouts, it is no wonder AMP’s directors opted to hold back a final dividend.
Shareholders received a special payment of 10 cents a share was paid for the June half, but AMP said the board was committed to restarting dividends this year, “subject to the completion of the portfolio review, market conditions and business performance”.
AMP’s board has also pulled its wealth management and bank businesses, AMP Australia and AMP Bank, from the sale process and will now return to focusing on chief executive Francesco De Ferrari’s three-year transformation strategy.
“AMP continues to review options for maximising the ability to grow and invest in AMP Capital including exploring partnership options,” the company said.
“The board will provide an update on the outcome of ongoing discussions as soon as possible.”
