AMP set to complete first stage of Dexus deal

The first stage completion of the sale and transfer of AMP Capital’s real estate and domestic infrastructure equity business to Dexus Funds Management will occur on Friday 24 March.

Both parties have entered into an unconditional agreement on a revised transaction structure for the sale of the business, AMP confirmed in a statement released on Monday morning.

According to AMP, the revised structure enables the transfer to Dexus of most legal entities, holding the majority of AMP Capital’s domestic assets and management rights.

At first completion, AMP will receive approximately $337 million from Dexus, including $175 million of the $225 million base purchase price for the real estate and domestic infrastructure equity business, $105 million for sponsor investments, and $57 million for the cash, net of the remaining liabilities, held on the business’ balance sheet.

Payment of the remaining $50 million of the base purchase price will remain contingent on the transfer of AMP’s interest in China Life AMP Asset Management Company Limited (CLAMP) out of the sale perimeter by 30 September 2024.

Following this transfer, the one remaining AMP Capital legal entity will move to Dexus and final completion of the transaction will occur.

The sale of AMP Capital’s real estate and domestic infrastructure equity business has been pushed back multiple times as the firms await regulatory approval in China.

“Completion of the sale of the remaining AMP Capital business will mark the delivery of a key pillar of our strategy to simplify AMP,” commented AMP CEO Alexis George.

“The sale allows AMP to have a clear focus on our go forward businesses of retail banking and wealth management in Australia and New Zealand. We will continue to build on the hard work of the past 12 months to position AMP to win in those markets, deliver for customers and drive value for shareholders.”

Over the past 18 months, AMP has offloaded its remaining interest in AMP Life to Resolution Life, its global equities and fixed income business to Macquarie, its infrastructure debt platform to Ares and its international infrastructure equity business to DigitalBridge.

Next phase of simplification

With the remaining AMP Capital transaction now close to being completed, AMP said that its simplification strategy will move into the next phase with the undertaking of a comprehensive review of its balance sheet and cost base.

The firm explained that the balance sheet review will be conducted with the view of returning excess liquidity to shareholders and/or reducing outstanding debt.

“While AMP has identified it has in the order of $500 million surplus capital, in the current environment it is deemed appropriate to retain this funding. When the capital and balance sheet review is completed, the return of excess liquidity will be reconsidered,” AMP said.

Following the simplification of its business, AMP said that its next step will be to determine the appropriate operating model and cost base for the future business.

“This work will be completed over the next six months and reflect the forward-looking focus on AMP Bank and the Australian and New Zealand wealth management businesses, together with the China partnerships,” the firm said.

AMP previously flagged that its controllable costs will be flat in FY23 as a result of higher inflation and the costs of transitional arrangements post completion of the AMP Capital deals.

However, the firm said that it believes there is an opportunity to drive further operational and group office efficiency across the simplified portfolio of businesses.

The outcomes of these reviews, including the quantum and intended use of any identified surplus liquidity and timing for delivery of identified cost savings, will be announced “as soon as practical” but no later than the release of AMP’s full-year results in August.

“AMP’s focus remains on organic growth in banking and wealth management and it does not intend to make any material acquisitions whilst the reviews are ongoing or prior to their outcomes being announced to shareholders,” it said.