Kiwi Wealth eyeing AMP arm?
Tight-lipped on possible interest in buying AMP’s New Zealand Financial Services business
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 Government-owned 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 KiwSaver funds under management and push it into the top three largest providers.
According to Morningstar data, AMP is the fourth largest KiwiSaver provider behind the banks ANZ, ASB and Westpac, while KiwiWealth is the sixth largest.
Global asset management consultants Mercer is also believed to have had a look at the AMP business but decided not to go further. Another possible buyer could be Fisher Funds, 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 only had 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 were to swallow AMP it could become the second largest in the market on 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 full 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 business as usual operations and serving its local clients.
Mammoth gain
The New Zealand share market put in a mammoth 25 per cent gain over the first three quarters of the the year to September 30, driven mostly by the power generators.
The S&P/NZX50 rose by 25 per cent over that time, driven by a 52.9 per cent increase in Meridian, a 46 per cent gain in Fisher and Paykel Healthcare, and a 45 per cent lift for Contact Energy.
The other power generators — Mercury, Genesis and Tustpower — were also in the top 10.
The worst performer was Sky Network TV with a 44 per cent decline, followed by the Fonterra Shareholders Fund with a 24 per cent drop, and Metlifecare with 15 per cent.
a2 Milk still whippy
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 and its very strong annual result.
There was some weakness in the the stock after last month’s investors presentation in Shanghai, which came up short in terms of some analysts’ expectations.
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 short-term profitability is likely to be impacted by the need to invest for top-line 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,” Trethewey said.
“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.”
Trethewey said the Shanghai trip confirmed for Milford why it owns stock in the company.
“Their brand is clearly very powerful and on the basis of that we believe that they will become a bigger player in time and the investment they’re making at the moment will set them up to really stake their claim as one of the major international brands up in China.”
a2 was also likely to withstand the impact of the US-China trade war better than many others, he said.
a2’s shares rallied sharply with the news that the Chinese dairy giant Mengniu was paying a 60 per cent premium to buy Bellamy’s.
Trethewey said the surge in the share price was partly driven by an expectation a2 could also be in line for a takeover bid.
The Chinese regulator recently set a 60 per cent consumption target of domestically produced infant formula.
That, in turn, could result in more of these sorts of deals and takeover offers for the international companies coming through, which a2 could be susceptible to.
It’s a high-quality problem to have.