AMP price target cut after CEO change
JP Morgan has slashed AMP's target price following the replacement of CEO Francesco De Ferrari by ANZ deputy Alexis George, saying the "apparent misalignment" between the board and the outgoing boss could adversely impact efforts to offload AMP Capital.
In an investor note JP Morgan lead insurance and financials analyst Siddharth Parameswaran reduced the price target for AMP from $1.80 to $1.59, despite Mr De Ferrari's retirement last Thursday boosting the share price by almost five per cent.
Mr Parameswaran said the downgrade was motivated by the "unfortunate" timing of the move given the $4.5bn financial services company is still in negotiation with US investment firm Ares over the sale of 60 per cent of AMP Capital's $2.25bn private markets business.
"As a negotiating point - it appears AMP has committed itself irrevocably towards the disposal of AMP CI - even without a binding bid," he said.
"Arguably, the strategic direction and plans have disappointingly been set even without closure of any deal.
"This would weaken the competitive tension any potential purchaser of the assets would have to consider - and would potentially lead to a lower sales price."
Last month Ares indicated that any potential deal may "materially differ" from the most recent offer of $1.35bn for 60 per cent of the private markets business.
"Although Ares and AMP continue discussions on a potential transaction involving AMP's private markets business, any potential transaction would be subject to a variety of conditions and structural considerations and Ares continues to conduct its due diligence," the US investment firm said in a Securities and Exchange Commission filing.
Mr Parameswaran said JP Morgan was "surprised" by AMP's approach to the private markets sale and pointed out that "a similar 'sell under all circumstances' approach arguably led to sub-optimal results for value preservation" when the company offloaded its life insurance division to Sir Clive Cowdery's Resolution Life last year for $3bn.
He also suggested that AMP consider a separate ASX listing for AMP Capital if a reasonable price is not offered by any suitor.
Despite slashing the AMP's target price following Ms George's appointment, Mr Parameswaran did not attribute the downgrade to her suitability, and said she may help pave the way for cultural reform at the company after allegations of inappropriate behaviour against two executives claimed the scalp of chairman David Murray last August.
"The appointment of Alexis could help cultural issues that may have been considered as an issue by investors and the board," he said.
"We understand from our channel checks that she is a considered individual who is quite inclusive."
JP Morgan's revised price target for AMP is still within the upper range of analyst forecasts, with the company having an average 12 month target price of $1.45, according to Bloomberg.
At 11am (AEST) on Tuesday AMP was trading at $1.30 per share, down 1.7 per cent.
Originally published as AMP price target cut after CEO change