AMP and Macquarie share prices on watch following GEFI sale

We examine the key points from AMP’s announced sale of its GEFI business to Macquarie Group.

There were no dramatic share price moves from Macquarie Group or AMP on Thursday, even as AMP announced it would be selling AMP Capital's Global Equities and FIxed Income (GEFI) business to Macquarie.

AMP’s GEFI business, which currently has approximately $60 billion in assets under management, boasts operations spanning fixed income, Australian listed equities, listed real estate and listed infrastructure. GEFI’s run-rate revenue for fiscal 2021 is $90 million and its earnings (underlying) ~$10 million.

The sale price for GEFI is for up to $185 million.

According to AMP management, the deal will help the firm deliver on its renewed emphasis of focusing on 'high-growth opportunities', primarily within private opposed to listed or public markets.

In addition to this, management noted that AMP Capital remained 'in the process of transferring the Multi-Asset Group business to AMP Australia to create an end-to-end superannuation and investment platform business.'

Other comments

Commenting on the sales announcement, AMP's Acting CEO, James Georgeson said:

'In bringing together two well-known Australian investment businesses with strong track records, we're pleased to deliver such a positive outcome for our clients, our GEFI teams and AMP shareholders.'

On the other hand, Head of Macquarie's Asset Management division, Ben Way, commenting on the implications of the deal, said:

'It cements Macquarie's position as the leading investment manager in Australia by AuM and allows us to further diversify our client offering and bring new opportunities to clients joining us from AMP Capital.’

Following the completition of the transaction, Macquarie said it would have pro-forma assets under management of around AUD$720 billion.

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Specifics of the deal

On a more granular level, the sale price of up to $185 million is made up of two components.

Firstly, it is made up a cash payment of $110 million, with the remaining $75 million cash earnout payable 2 years after the transaction is completed (the second anniversary).

Moreover, the deal includes both GEFI’s existing assets as well as its staff, which will transfer to Macquarie following the completion of the sale.

Importantly, the reason the sale price is ‘up to’ $185 million, is because it is based on AMP meeting a number of conditions, with the financial firm highlighting revenue hurdles as one such condition. No further specifics, however, were provided.

Should no issue arise, AMP said it expected the deal to be finalised during the first quarter of calendar 2022.

Despite the hefty price tag, AMP management noted that the expectation was for the post tax gain to have a ‘broadly neutral’ impact as a result of one-time costs and adjustments.

The AMP share price finished the session flat, while Macquarie's stock closed up slightly.

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