AMP Ltd has agreed a deal to sell a 60 percent stake in AMP Capital to Ares Management Corporation for A$1.35 billion ($1.06 billion; €871.7 million), sister title Infrastructure Investor has reported.
The Australian Securities Exchange-listed parent of AMP Capital announced the deal to shareholders today. It described the deal as a “joint venture partnership” covering AMP Capital’s private markets businesses of infrastructure equity and infrastructure debt, real estate and other minority investments.
Ares will acquire a 60 percent stake in the business and assume management control, with AMP Capital retaining a 40 percent stake.
The deal values AMP Capital’s private markets businesses at A$2.25 billion, comprising the amount Ares will pay and the A$0.9 billion of assets and other considerations that AMP Ltd will retain.
AMP Ltd said in a statement that the latter comprised seed and sponsor and related investments of approximately A$0.5 billion; surplus capital released of A$0.1 billion; and a contingent consideration of up to A$0.3 billion related to future performance, including carried interest from existing funds.
AMP Ltd and Ares have now entered a 30-day exclusivity period to work towards a binding transaction.
The two parties have been in talks since October 2020, when Ares made a non-binding indicative offer to acquire 100 percent of AMP Ltd after the latter launched a strategic review. After talks on a full takeover broke down earlier this year, Ares remained in discussions over acquiring AMP Capital, which has resulted in the deal announced today.
AMP Ltd said the joint venture is expected to raise A$0.5 billion of debt “to maximize capital efficiency,” which would also reduce the pro-rata equity contributions for each party. Assuming this proceeds, Ares would thus fund A$1.05 billion in equity to the joint venture and AMP Ltd would receive expected gross cash proceeds of up to A$1.55 billion, before separation costs and any release of capital.
AMP Ltd also said the proposed deal would mark the conclusion of its strategic review.
Ares had $197 billion in assets under management on December 31, including $18.3 billion in infrastructure and real estate AUM. It employs more than 100 investment professionals in North America and Europe.
AMP Capital’s AUM across both its private and public markets businesses decreased by 7 percent to A$189.8 billion in FY20 (down from A$203.1 billion in FY19), while average AUM over the year also decreased to A$193.8 billion.
AMP Ltd said the deal would allow its shareholders “to benefit from both the anticipated accelerated growth of [AMP Capital’s private markets businesses] through its 40 percent shareholding, as well as realizing value from … growth to date.” It added that Ares’ shareholders would benefit from an expansion of its infrastructure and real estate strategies to more than $60 billion in total AUM.
Ares Management Corporation chief executive Michael Arougheti said in a statement: “We are excited to further expand our real estate and infrastructure investment capabilities through our partnership with AMP. We believe we can add significant value through our global scale, relationship network, investor relationships and our broad, collaborative investment platform.
“We’ve been impressed by the growth of AMP Capital’s private markets business over the past several years and our time with the team as part of the portfolio review has further cemented our view on the intrinsic value of this business under our leadership. We expect that this transaction would be highly strategic and complementary to our business and financially accretive for our shareholders.”
AMP Capital is one of the largest direct real estate fund managers in the Asia-Pacific with A$28.22 billion in real estate assets under management as of December 31, according to its website. The firm’s commingled funds and separately managed accounts target commercial real estate equity and debt strategies in Australia, New Zealand and the US, the latter through its ownership stake in Los Angeles-based real estate investment manager PCCP.