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February 11, 2021

Ares Management backs out of $4.9bn acquisition bid for Australia’s AMP

By Amala Johney

American private equity firm Ares Management has scrapped its $4.9bn buyout offer for Australian wealth manager AMP .

AMP said that it has been informed by Ares that it does not intend to go ahead with its non-binding indicative proposal for the company.

Ares, which previously offered to acquire 100% of AMP with each share priced at $1.85, is still interested in AMP’s $190bn asset management unit, AMP Capital.

The unit, which brings in more than a third of the company’s underlying earnings, invests across unlisted real estate, infrastructure and global markets.

AMP said it will continue to ‘engage constructively with Ares in relation to AMP Capital’ as part of its portfolio review.

Ares dropped its offer partly due to concerns over the declining performance of AMP’s wealth management arm, Bloomberg reported citing people familiar with the matter.

The company said that net profit after tax (NPAT) at its Australian wealth business plummeted 44% year-on-year to A$110m in FY 20 after investors pulled out A$8.3bn of funds.

According to sources, AMP Capital’s expertise in managing infrastructure assets for third-party owners is of significant interest to Ares.

AMP CEO Francesco De Ferrari said that the company is currently in talks with Ares regarding the unit, including options for a potential partnership.

AMP decide to sell itself last year after it got caught up in a sexual harassment scandal. The company reportedly lost nearly three-quarters of its value during this period.

Results and Dividend

AMP’s underlying NPAT in FY20 slumped to A$295m from A$439m a year ago.

However, on a statutory basis, it swung to a profit of A$177m from a A$2.5bn loss in the previous year.

Volatile investment markets and outflows hit assets under management, which dropped 8% in Australian wealth management and decreased 7% in AMP Capital.

The company also postponed the final dividend for a second year. It said that the board is committed to restarting initiatives to give cash back to shareholders this year once portfolio review is completed.

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