A JP Morgan analyst says the "unfortunate" timing of the CEO switch prompted the downgrade
JP Morgan has cut AMP’s target price following the announcement of the ouster of CEO Francesco De Ferrari.
Last week, just days after AMP denied that De Ferrari was on his way out the door, the company announced that he would be replaced by ANZ deputy chief executive Alexis George.
JP Morgan said that the “apparent misalignment” between the AMP board and the outgoing CEO could adversely affect efforts to sell AMP Capital. In an investor note, JP Morgan lead insurance and financials analyst Siddharth Parameswaran slashed the target price for AMP from $1.80 per share to $1.59, despite De Ferrari’s departure on Thursday boosting the share price by nearly 5%, The Australian reported.
Parameswaran said JP Morgan’s downgrade was prompted by the “unfortunate” timing of the CEO switch, since the financial services company is still negotiating with US investment firm Ares over the sale of 60% of AMP Capital’s private markets business.
“As a negotiating point – it appears AMP has committed itself irrevocably towards the disposal of AMP CI – even without a binding bid,” he said. “Arguably, the strategic direction and plans have disappointingly been set even without closure of any deal. This would weaken the competitive tension any purchaser of the assets would have to consider – and would potentially lead to a lower sales price.”
Last month, Ares hinted that any deal may “materially differ” from its most recent offer of $1.35 billion for 60% of AMP Capital’s private markets business, The Australian reported.
“Although Ares and AMP continue discussions on a potential transaction involving AMP’s private markets business, any potential transaction would be subject to a variety of conditions and structural considerations and Ares continues to conduct its due diligence,” Ares said in a filing with the US Securities and Exchange Commission.
Parameswaran said JP Morgan was “surprised” by AMP’s approach to the sale. He said that “a similar ‘sell under all circumstances’ approach arguably led to sub-optimal results for value preservation” when AMP sold its life insurance division to Resolution Life for $3 billion last year.
Parameswaran suggested that AMP consider a separate ASX listing for AMP Capital if no prospective buyer offers a reasonable price for the business, The Australian reported.