Debt and cash deal for AMP
FINANCIAL services group AMP is to pump more cash into its British business and take on its £1bn debt as the price for regulatory permission to spin off the loss-making UK arm.
The troubled Australian company also confirmed that it would raise A$1.2bn (£497m) through a rights issue to fund the demerger.
AMP on Friday said that the Financial Services Authority and its Australian equivalent, APRA, had given 'in principle' approval for the demerger by the end of the year. AMP must put an additional £34m into the British business.
The new British company, which will include the Henderson funds management business and the closed life insurance operations of Pearl, NPI and London Life, will be known as HHG.
The British business will be offered to the market in December, and AMP will retain an initial 15% stake.
The market had not expected the additional capital injection nor the assumption of the British arm's debt. Investors nevertheless welcomed the green light for the demerger, with AMP shares rising more than 5% to A$6.98 in Sydney.
Brokers said the rise was partly fuelled by renewed speculation that with the demerger now apparentlyon track, potential bidders could step up for AMP's well-performing Australian operators.
National Australia Bank emerged with just over 5% of AMP after a market raid in September, but has said it had no interest in a full bid while AMP still includes its British unit.
There are also reports that AMP is set to announce the sale of its reinsurance arm to Swiss Re for around A$600 million.
AMP has already injected £191m into its UK operations after a A$1.72bn equity raising earlier this year. The British business, hit by the decline in share markets, had come close to breaching solvency requirements.
AMP chief executive Andrew Mohl said Friday's announcement showed the group's capital position was 'better than anticipated'.
'The complexities of the merger have been substantial but we believe we have achieved an outcome that is set to deliver real benefits to AMP shareholders,' he added.
The plan also involves HHG buying AMP's stake in AMP Invest, Henderson's parent, by next March when the HHG is expected to enter the FTSE 250 index. It will need to raise 'at least' £100m for that purchase.
Mohl said AMP had not received attractive offers for any of its British business, but that the way was now clear for potential buyers to raise their bids.
