AMP Collimate sale to Dexus hits snag with Chinese regulator delay, sale price cut by $25m

A major part of AMP's (ASX: AMP) separation plans for AMP Capital have hit a snag today after the group announced further delays for its sale of Collimate's real estate and domestic infrastructure equity business to Dexus Funds Management, as well as a reduced windfall even if the deal goes ahead. 

In April 2022 the group struck a deal with Dexus (ASX: DXS) to sell the subsidiary which, in addition to its own management platform and expertise, at the time had assets under management (AUM) of approximately $27.9 billion, with a portfolio heavily weighted towards office and retail properties as well as airport infrastructure and other segments.

The original deal included a $250 million cash consideration, plus an earn-out of up to $450 million subject to AUM retention and other conditions.

Most of that potential earn-out evaporated in July when AMP Capital Wholesale Office Fund (AWOF) investors voted to transfer management to Mirvac (ASX: MGR), meaning that possible earn-out now sits at just $26 million.

But if AMP cannot sort out a particular condition in China by 26 January, the transaction could take a $51 million hit through the erasure of that earn-out and a cut to the upfront cash payment down to $225 million.

Being a domestically-focused agreement, AMP needed to transfer its interest in China Life AMP Asset Management (CLAMP) out of the sale perimeter before the transaction could go ahead, but that hurdle has proved challenging.

At the end of June the company estimated the sale would be completed by the end of September, and after that didn't transpire there was an update on 11 November that the sale might not be completed by the end of that month.

Now the group has highlighted continued uncertainty ahead of the cut-off date.

"While AMP continues to work towards achieving regulatory approval, there is uncertainty around achieving this date," the group stated in an ASX release this morning.

The initial deal gave each party the right to terminate the agreement by 27 January, but both have agreed to extend it to 28 February with the new purchase price and a forfeiture of the earn-out.

In light of the Chinese regulator issue, the two companies are also exploring other alternatives to accommodate the CLAMP interest.

"AMP and Dexus have entered into a non-binding term sheet which contemplates a revised transaction structure with a two-stage completion process," AMP stated.

"If binding agreements are entered into, the revised transaction structure would allow for most legal entities (holding the majority of the Collimate Capital domestic assets and management rights) as well as employees, to transfer to Dexus at first completion, prior to the satisfaction of the remaining condition precedent and by March 2023.

"The transfer of one remaining entity (which currently holds the interest in CLAMP) would occur at final completion following receipt of the necessary regulatory approval."

For the sake of flexibility, this alternative transaction approach will be pursued in parallel to the existing transaction structure.

One day after announcing the deal to sell Collimate Capital's real estate and domestic infrastructure businesses to Dexus, AMP announced Collimate's international infrastructure equity business would be sold to Florida-headquartered DigitalBridge Investment for an upfront consideration of $462 million and total value of up to $699 million.

In today's update, AMP reported that sale was in the final stages of the formal approval process with a view to completion by February.

If achieved, that milestone would occur close to the anniversary of another major Collimate divestment - the $578 million sale of its infrastructure debt platform to Los Angeles-based Ares Management.

In December 2022 AMP finalised the earn-out payment and other adjustments following the completion of its Global Equities and Fixed Income (GEFI) business to Macquarie Asset Management (MAM), bringing in a total sale price of $88.5 million for another of AMP Capital's assets.

This string of sales stems from a portfolio review undertaken in 2021, which concluded AMP was made up of two distinct businesses that would be stronger apart.

"As separate businesses they could better focus on growth opportunities in their respective markets and realise efficiencies - creating more value for shareholders," chair Debra Hazelton noted at last year's annual general meeting (AGM) in May.

"As a result, we began the complex process of separation and simplification with plans to demerge Collimate Capital from AMP Limited.

"The transactions also significantly strengthen our capital position which enables a sizable return of capital to shareholders, likely to be by way of on-market share buyback and capital return. The board has committed to returning the majority of net cash proceeds to shareholders, after allowing for the paydown of some debt," she said at the time.