Embattled Australian wealth manager AMP Ltd has ended protracted talks with Ares Management Corp to sell its asset management arm’s private markets business, instead on Friday announcing it will spin off and re-brand the unit.

As part of the new plans, which come months after Ares had downgraded a proposal to purchase the whole company for $4.9 billion to a plan to take a majority stake in AMP Capital’s private business, AMP will kick-start a A$200 million ($154 million) share buyback.

“We have had substantial and constructive discussions with Ares regarding a sale, however, we have not been able to reach an agreement that would deliver appropriate value for our shareholders,” AMP Chair Debra Hazelton said.

“We will now accelerate our demerger planning, building on the preliminary work already undertaken.”

Boe Pahari, a senior executive who was demoted following shareholder pressure over concerns about alleged inappropriate conduct, will depart the firm, the company added.

Investors will receive shares in the new demerged company that will be listed on the Australian stock market and own about 80% of the private markets business, while AMP will keep a minority stake of up to 20%.

The new plans meant AMP shareholders will now have to fund the separation costs, the removal of stranded costs, the pay-down of debt and likely another major cost out programme, analysts said.

“In our view, announcing a portfolio review was a risky strategy by the AMP Board. Nine months later, it would appear that external parties have struggled to see enough value in the AMP business to warrant taking it on,” UBS analysts said.

“While AMP has announced it will start the A$200 million buyback, further capital management, which was a big part of the positive AMP thesis, now looks unlikely.”

AMP’s private markets business, which includes infrastructure equity and debt as well as real estate, has more than A$50 billion of assets under management.

The announcement of the spin-off, which is expected to be completed in the first half of fiscal 2022, follows a company-wide asset review last year.

An operational update on Thursday showed AMP continues to lose clients after three years of reputational damage that has sent its share price sliding.

Reuters