AMP’s own-goal mastery has reached epic levels as it fails to sell itself
What goes for a transformation strategy at AMP could be better described as a strategy shemozzle. You have to ask yourself – what was the board thinking?
Had this company not blown up so much capital over the past few years, its mounting pile of conduct and cultural mistakes could almost be comical.
The latest of which was its failed attempt to sell itself.
Only one buyer, Ares Management, emerged – so no competitive auction there. And now the only bidder in the room has walked away and in doing so has confirmed most people’s suspicions that it was only ever interested in buying one part of the business anyway, AMP Capital.
AMP chief executive Francesco De Ferrari’s strategy was sidelined when the company puts itself up for sale.Credit: Louie Douvis
Why AMP decided last year to announce it was entertaining bidders is unfathomable. It is tantamount to admitting that its own turnaround strategy wasn’t working.
Only two years earlier, AMP made an enormous fanfare about snagging a new chief executive, Francesco De Ferrari. His job was to revive the ailing financial conglomerate’s performance, which had been harpooned when it was found (among other things) to have engaged in misconduct including lying to the regulator and charging customers fees for no service.
Thanks to the lack of interest in a full takeover, the AMP board and advisers will now be left fielding interest for AMP Capital – the jewel in AMP’s crown, which is otherwise studded with kryptonite.
Its decision to put itself on the market so soon after De Ferrari’s arrival has seriously undermined his position.
You have to wonder whether De Ferrari has the appetite to hang around.
He signed on to revive and run a large financial services conglomerate, which has now been outed as sufficiently unappealing that a buyer for it can’t be found.
That’s a bell that can’t be unrung.
Responsibility for the decision to undertake this strategic review of assets was taken by its chairman Debra Hazelton immediately after her appointment to replace David Murray – who resigned in the wake of the sexual harassment scandal involving the head of AMP Capital, Boe Pahari.
Sources close to the board say fellow board member and former chairman of Credit Suisse Australia John O’Sullivan was a driving force behind the strategic review of AMP assets. Credit Suisse is AMP’s key adviser and co-incidentally, former head of Credit Suisse in Australia John Knox is the local chairman of Ares Management.
Thanks to the lack of interest in a full takeover of the company, the AMP board and advisers will now be left fielding interest for AMP Capital – the jewel in AMP’s crown, which is otherwise studded with kryptonite.
AMP Wealth (the advisory business) has endured major outflows over the past few years (and did so again in the results announced on Thursday). De Ferrari has been attempting to restructure this operation after its business model was blown up following the royal commission into financial services.
It is 80 per cent through its customer remediation process – which AMP says will ultimately cost it $778 million.
But the ultimate cost of AMP’s misconduct is anyone’s guess, given there are currently four class actions on foot.
AMP Wealth serves as a poison pill for any buyer looking at the whole of the business, and it certainly explains Ares Management’s reluctance to make a bid for the whole of AMP.
The only other division inside AMP of significance is the bank – which is relatively small and sits neatly alongside wealth management. AMP Life was sold last year for $3 billion.
But on Thursday the board raised the white flag on its attempts to sell any of the business other than AMP capital.
AMP has around $190 billion in funds under management, and while it suffered outflows and a dip in profit in 2020, it remains attractive to the likes of Macquarie and a range of international parties.
If AMP Capital can attract a decent price, one presumes that it will be sold. While AMP shareholders can expect to receive a distribution from the proceeds, they will be left holding shares in a troubled wealth management business and a small bank.
Once the fifth pillar of Australia’s financial services industry, this company will have shrunk to a medium-sized business.
Its share price has followed suit. Five years ago AMP stock was trading at around $6. Today it’s trading at $1.38.
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