Why has the AMP share price climbed today?

Posted: 24 December 2021 11:51 am
News
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Shares in the struggling wealth management giant are down more than 21% in the last 6 months.

Investors in AMP (ASX: AMP) may have got a small present on Christmas Eve, with shares in the beleaguered wealth management giant rallying after weeks of negative performance. The stock climbed more than 6% in early trade and was still up 5.9% at 99.5 cents at the time of writing.

Why has the AMP stock price jumped?

AMP shares rallied after the company agreed to sell AMP Capital's infrastructure debt unit to US-based asset manager Ares Management for a total cash consideration of $428 million.

The sale of the division, which has assets under management worth $7 billion, is the latest effort by the financial services giant at streamlining its business ahead of a demerger of the group in the first half of 2022.

Last month, it took impairment charges of $325 million to prepare for the impending demerger, and had previously completed the sale of its life insurance business to UK-based Resolution.

AMP has told shareholders it would demerge the AMP Capital private markets business, with the main company to operate as a retail wealth manager in Australia and New Zealand, focusing on banking and wealth, as well as opportunities in retirement and direct-to-consumer solutions.

The new entity, PrivateMarketsCo, will build its presence as a global leader in the fast-growing private markets industry, with focus on scaling the existing infrastructure and real estate investment strategies.

Realising value

The latest transaction will allow PrivateMarketsCo to focus on its key strength of managing equity investments in real estate and infrastructure, AMP said. It will also simplify the new entity’s structure and realise significant value to support the growth of these businesses.

“PrivateMarketsCo and AMP will realise significant value from the divestment, as well as retaining our valuable sponsor investments and carried interest in the closed Infrastructure Debt funds,” PrivateMarketsCo CEO Shawn Johnson said in a statement.

“This will provide a strong revenue stream in coming years as we demerge PrivateMarketsCo and accelerate the momentum in our business.”

The cash proceeds from the sale will strengthen the capital position of the AMP Group. In addition, the deal will cease the future capital requirements for PrivateMarketsCo for the Infrastructure Debt platform.

AMP said the separation of the balance sheet and allocations of surplus capital between the two entities is continuing as part of the demerger preparations.

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