Kiwi Wealth said to be eyeing AMP arm, $5.59b KiwiSaver asset

AUCKLAND: Kiwi Wealth is said to be a possible buyer for AMP’s New Zealand Financial Services business and the prized jewel of its $5.59 billion KiwiSaver asset.

The Governmentowned KiwiSaver provider, which is part of the same group as Kiwibank — owned by NZ Post, the New Zealand Superannuation Fund and ACC — would not comment on the speculation.

Buying the AMP business would more than double its KiwiSaver funds under management and push it into the top three largest providers.

According to Morningstar data AMP is the fourthlargest KiwiSaver provider at present, behind the banks — ANZ, ASB and Westpac — while Kiwi Wealth is the sixthlargest.

Global asset management consultancy Mercer is also believed to have had a look at the AMP business but decided not to go further.

Another possible buyer is Fisher Funds, which is majority owned by TSB Bank.

Fisher Funds paid $79 million to buy Tower’s investment business, including its KiwiSaver arm, in 2013. But the Tower business had only about $894 million in funds under management at the time.

AMP is much larger because of its merger with AXA, which was also an early KiwiSaver default provider.

If Fisher Funds was to swallow AMP it could become the secondlargest in the market, on a par with ASB with more than $10 billion in KiwiSaver funds under management.

Global private equity players are also likely to be interested in the asset, although a trade sale would make more sense because of the potential for cost savings in bringing two similar businesses together.

The sale process was said to be kicking into top gear this month, although Australian media have speculated it could be delayed until January.

An AMP New Zealand Financial Services spokesman said that was just speculation and nothing had changed. New Zealand investment bank Jarden is handling the sales process.

The AMP spokesman said its core focus remained on its businessasusual operations and serving its local clients.

The New Zealand sharemarket put in a mammoth 25% gain over the first three quarters of the year to September 30, driven mostly by the power generators.

The S&P/NZX50 rose by 25% over that time, driven by a 52.9% increase for Meridian, a 46% gain for Fisher and Paykel Healthcare and a 45% lift for Contact Energy.

The other power generators — Mercury, Genesis and Trustpower — were also in the top 10.

The worst performer was Sky Network TV with a 44% decline, followed by the Fonterra Shareholders Fund with a 24% drop and Metlifecare with a 15% fall.

Trading in a2 Milk has continued to be volatile since the announced takeover by China’s Mengniu of one of its peers, Australia’s Bellamy’s.

There was some weakness in the stock after last month’s investors presentation in Shanghai, which came up short in terms of some analysts’ expectations.

But Milford Asset Management portfolio manager Sam Trethewey came back from China with a positive outlook for the stock.

He said a2 had been emphasising its need to ‘‘step up’’ in driving market awareness and investing in the business.

‘‘That means that shortterm profitability is likely to be impacted by the need to invest for topline growth,’’ he said.

‘‘What we’re seeing at the moment and reflected in the share price movement after the results announcement is that those that don’t like that story are exiting and those that do are buying in.

‘‘That has seen some significant turnover in the register and that will take some time to settle down.

‘‘But ultimately you are backing the management team to pull off this aggressive growth and justify that investment by owning it.’’

A2 was also likely to withstand the impact of the USChina trade war better than many others, he said.

A2’s shares rallied sharply with the news Chinese dairy giant Mengniu was paying a 60% premium to buy Bellamy’s.

Mr Trethewey said the surge in the share price was partly driven by an expectation that a2 could also be in line for a takeover bid.

The Chinese regulator recently set a 60% consumption target for domestically produced infant formula and that, in turn, could result in more Bellamy’sstyle deals. — The New Zealand Herald

❛ But ultimately you are backing the management team to pull off this aggressive growth and justify

that investment by owning it