AMP Rekindles Deal with Ares, Share Price Rebounds (ASX:AMP)

Last week we visited the AMP Ltd [ASX:AMP] share price after it had plummeted on a scrapped takeover bid from US asset manager Ares Management.

Just a little over a week on from the fiasco and AMP has now inked a fresh deal with Ares to sell 60% the company.

The news has delighted frustrated shareholders with the AMP share price rising 5.16% or 7.2 cents, trading at $1.47 per share — reversing a steep downwards trend.

ASX AMP Share Price Chart - AMP Ltd

Source: TradingView

But will this partial takeover be able to give AMP the scalability to so desperately needs?

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Can someone else fix AMP’s woes?

Last time we visited the AMP share price I took a rather harsh stance on its outlook. I believe I used words to the effect of ‘relic’ and ‘window into the past’.

And it’s a stance I haven’t changed even in light of today’s deal.

Don’t get me wrong, it is a good move from AMP.

It was struggling to generate growth organically and its stretched cash position essentially ruled out any acquisition to get growth going.

But without this deal AMP would essentially be dead in the water, in my opinion at least.

The new deal will see AMP sell 60% of its Private Markets business to Ares for $1.35 billion.

Not the full buyout AMP was looking for a few weeks ago, but better than nothing.

With AMP to retain the other 40%, the firm will be seeking to leverage Ares’ global distribution networks and infrastructure and real estate expertise.

AMP has kept the door open to sell off their remaining share after the next five years having structed put and call options into the deal.

AMP says it will get gross cash proceeds of a maximum of $1.55 billion before separation costs and capital release.

Where does this leave AMP Share Price?

Although the company is in the midst of its three-year transformation after it was hammered by the royal commission into financial services, it’s difficult to see material changes thus far.

CEO Francesco De Ferrari commented:

The transaction will enable AMP to increase focus on the transformation of our wealth management business in Australia, drive the continued growth of AMP Bank and New Zealand wealth management and benefit from driving further efficiency.

AMP is also continuing to actively explore a sale or partnership deal for its global equities and fixed income arms.

To be clear, I don’t doubt the ability of AMP to turn themselves around.

But that road will be long and bumpy.

As we have already seen.

And other Aussie blue chip stocks will be forced to walk the same road as AMP due to the pandemic. Economist Vern Gowdie reveals the five Aussie blue chip stocks you should sell immediately in his latest report. Get your free copy here.

 

Regards,

Lachlann Tierney
For The Rum Rebellion


Lachlann Tierney is a writer for The Rum Rebellion and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. 


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