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AMP, Ares deal up in the air

AMP has concluded its exclusivity period with Ares Management raising uncertainty as to whether the acquisition of AMP Capital's private markets business will go ahead.

As previously announced, both firms are pursuing a joint venture where Ares will assume the management control of the private markets businesses which includes equity, infrastructure debt, real estate and other minority investments, while AMP will retain a 40% stake.

The 30-day exclusivity period in the heads of agreement with no certainty that the transaction will proceed.

The news follows speculation last week that AMP chief executive Francesco De Ferrari was to resign. AMP was forced to enter a trading halt before confirming that he remains in the lead role.

After that announcement, Allan Gray portfolio manager Simon Mawhinney told Financial Standard that he believes AMP Capital will separate from AMP with or without Ares. He added that if the Ares deal doesn't succeed, 100% of AMP Capital should be distributed in specie to current AMP shareholders.

The private markets transaction, if it goes ahead, is valued at $2.25 billion with Ares outlaying $1.35 billion for its stake.

AMP will retain $0.9 billion of assets which includes seed and sponsor investments, surplus capital and future performance from existing funds.

The joint venture aims to accelerate the growth of the AMP Capital private markets, capitalising on Ares' current capabilities in real estate and private equity. Ares will appoint six board members and AMP will nominate four.

The news of the joint venture came after Ares previously made a non-indicative proposal to acquire 100% of the AMP Capital for $1.85 per share, totalling around $6.35 billion. But then Ares later dropped its proposal.

In addition, AMP is "actively exploring" sale opportunities for its global equities and fixed income segments.

De Ferrari previously said AMP's scale is unable to compete with global players.

"Ultimately it is a scale game. We will be looking for opportunities to find a better solution for shareholders. We have a great product, we simply do not have the scale to grow this business globally," De Ferrari said.

Read more: AMP CapitalAres ManagementFrancesco De FerrariAllan GraySimon Mawhinney