Demerger preacher spreads the 'good AMP' word

By PAM GRAHAM


Andrew Mohl's job for the last month has been to sell a nearly 600-page financial document to about 1 million shareholders.

The AMP chief executive hopes the message is getting through and that on December 9 shareholders will approve the dismantling of a failed Australian bid to become a global force in financial services.

If they do, AMP New Zealand, the nation's largest retail fund manager, will be part of the Australasian business dubbed "good AMP".

The critics say it will still be exposed to AMP's "bad" business in Britain, which is being spun off into a separate London-listed company, HHG, through a 15 per cent shareholding.

Critics also charge that AMP remains a takeover target until it rebuilds investor confidence.

The scheme means a shareholder with 100 AMP shares would also receive 100 HHG shares, and can buy new shares in a rights issue.

"There is no long-term benefit in managing the Australasian and UK businesses together within one group any more - if there ever was," Mohl said in Auckland yesterday.

Fifty per cent of AMP's 989,000 shareholders by number and 75 per cent by ownership must approve the demerger.

About 10 per cent of the shareholders are New Zealanders, half of them institutions and the rest so-called "mums and dads".

The demerger's explanatory memorandum was tweaked as late as Friday in a supplementary memorandum that brought forward a separate £100 million ($269 million) capital raising for the British business.

Analysts are struggling to value the proposed companies but one said yesterday that based on a share price of A$6.30, AMP would be worth A$4.91 and HHG A$1.30.

Mohl's message yesterday on the last days of his global demerger roadshow was that there is strong support for the strategy.

"We haven't found anyone who has said, 'I've got a better plan'."

The only alternative was a trade sale of the British business.

The demerger is being sold as "a coming home" for the Australasian business and a returning of management focus on the region.

In New Zealand's case, the business made profits while other AMP businesses floundered.

"The good thing is that New Zealand will be about 10 per cent of the [Australasian] group, double the share it had before," Mohl said.

His take on AMP's recent history was that it was a wealthy company that used its wealth to invest overseas and got into difficulties.

The British life insurance firm was caught out, like many others, by the weak London sharemarket.

The most widely reported problem was that benefits of life insurance policies were fixed while policyholders' funds were invested in equities. Regulators sought more capital to cover future liabilities when the British equity market fell.

"We were moving capital out of Australasia when we were making twice the return in this part of the world," Mohl said.

Describing himself laughingly as the "patsy" the company turned to last October, he has a reputation as a good communicator and has no bold acquisition plans.

"As we generate significant earnings we'll be using those earnings to pay down debt."

Why should New Zealand shareholders support an Australian head office that made mistakes?

"Our view is that Australasia is the vehicle. These are two economies that have a lot of similarities," Mohl said.

The brand had suffered "but the business has been resilient".

Market share could be increased in life insurance in New Zealand, and in funds management there were opportunities in property, private capital and boosting margins in existing businesses.

AMP has rejected the idea of a merger with a bank. It sells bank services sourced from third parties.

"We believe we are a true wealth management company," Mohl said. "Banks have tried to build wealth management into their core system. Basically they've struggled."

Banks were at the end of a golden decade of mortgage lending, while insurers were moving off the bottom of a cycle.