AMP, the major lender that has struggled to keep pace in 2018 amid some of the scandals unearthed by the Royal Commission inquiry, has seen a rise in its share price as rumors increase that Macquarie is considering a takeover.
Having sold off its insurance arm to Japanese company Mitsubishi last week for $3.3bn, AMP has already been courting controversy with shareholders, and it seems to be throwing itself into the firing line yet again.
The news from late last month saw its share price plummet by 30%, and this led to increasing speculation of a takeover being possible.
At present, market sentiment seems to suggest that Macquarie Group is keeping a watchful eye on developments and may well be undergoing some form of diligence.
This could prove to be a great time to snap up a business with plenty of potential for growth and better performance. Until the financial misconduct inquiry sapped the shares of much of its value, AMP was riding high. However, after several issues with the selling of its the super funds came into question, public and investor trust fell rapidly.
IAMP is yet to rebound effectively, and given that it was trading at $5.47 before April’s inquiry began proceedings, its current small increase in price to $2.64 this week still serves as a reminder of how far it has fallen.
The deal for selling its insurance arm was not received well by all shareholders, as Merlon Capital Partners called the decision to make it public ‘farcical,’ claiming that some of the numbers used in justification were fabricated and could not be held up to account.
Given Macquarie’s interest in developing new markets to operate in, the acquisition would make a lot of sense. AMP Capital has a clearly defined audience when it comes to investing in real estate and infrastructure, and this would allow the asset management company to make bigger inroads into distribution and wealth management in new sectors.
Although no deal is anywhere near a certainty, Macquarie may have been testing the water for some time, given its presence in a consortium with KKR and China Life, which were interested in AMP.
The letter sent by Merlon Capital to AMP’s board this week said that the company is overvaluing its mature and wealth protection assets. It added that it views AMP’s deal as 6.5 times the amount of historic earnings that it had pulled in rather than the elevenfold rise cited by the company.
The letter said: ‘The new disclosure that the board knowingly forwent $705m in franking credit value in considering this transaction causes us great concern.’ It added that there is a need for these issues to be resolved immediately.
Merlon Capital Partners said that unless a clear path of resolution is established, it and other investors would have to ‘convene an extraordinary general meeting calling for change.’ It cited its legal rights and criticized AMP for saying that Merlon had not done its numbers properly.
Responding to what was said in the letter, a spokesman for AMP said: ‘It is highly unusual, if not unique, for an activist shareholder to threaten defamation proceedings against a company simply for highlighting misunderstandings or misinterpretations in their analysis.’
AMP also said that it only responded in such a way because Merlon published an open letter.