The ASX has been drawn into the debate over AMP’s controversial life insurance divestment after multiple shareholders including a powerful industry fund representative have begun lobbying the exchange to put the deal on ice.
The Australian Financial Review understands that the Australian Council of Superannuation Investors – which represents a group of industry funds with more than $2.3 trillion in assets and owns roughly 10 per cent of every company on the ASX – is among those to have written to the ASX about the deal.
A spokesperson for the ASX confirmed it had been approached by multiple parties about the proposed transaction and would carefully consider any new information that came to light. The ASX has said the transaction did not meet the necessary thresholds under Chapter 11 of the listing rules to trigger a shareholder vote.
ACSI’s executive manager of governance, Edward John, declined to confirm whether the organisation had written to the ASX about the deal but said it was only fair for a company proposing a transformational deal to get shareholder approval before proceeding.
“It is reasonable for investors to expect that company-changing transactions should require security holder approval. That’s what the ASX listing rules are there for,” Mr John said.
“We make no judgment of the value of the AMP Life proposal, ACSI’s concern is a critical governance principle. The key question is – will the ASX apply the Listing Rules and allow shareholders to vote on this company-transforming transaction?”
A spokesperson for AMP said the transaction was discussed with the exchange with specific reference to Chapter 11 before the announcement.
“The ASX confirmed that shareholder approval was not required for this transaction under chapter 11” the spokesperson said.
Controversy over the transaction emerged last week when fund-manager-turned-activist Merlon Capital criticised the deal and the way AMP pitched it to shareholders in a letter where it described the deal as reckless, inept and value-destroying.
AMP chairman David Murray appeared on ABC television last Thursday to defend the deal. He said it was completely unrealistic to put the deal to shareholders and said shareholders appoint directors to make those decisions for them.
‘The AMP we own today is very different to the AMP we owned last week’
Allan Gray chief investment officer Simon Mawhinney threw his support behind the push for a shareholder vote over the weekend, saying he was against the transaction but would be comfortable with either outcome.
“The AMP we own today is very different to the AMP we owned last week, its material. It’s our company, not theirs and we should be allowed to vote,” Mr Mawhinney said.
Mr Mawhinney said he had some sympathy for the view that shareholders appoint the board to implement the strategy but “I don’t know when this particular strategy was laid out, where is this document and when did we vote on that? It’s just disappointing”.
He also said that if the company felt obliged to convince shareholders of the merits of the deal then the “haphazard disclosure” and “unhelpful mudslinging” would have never occurred in the first place.
Merlon Capital has engaged Arnold Bloch Leibler partner Jeremy Leibler to advise them on their attempts to scuttle the deal and put it do a vote. Mr Leibler said he is astounded by the chain of events and written to ASX chief compliance officer Kevin Lewis on Merlon’s behalf and urged them to apply the listing rules.
“The AMP board had an internal actuarial valuation of the business which was $2 billion more than what they propose to sell it for. It beggars belief that in the face of this, the board has proceeded without an independent expert’s valuation to ensure that they are not depriving shareholders,” he said.
“David Murray has been appointed as Chairman to steer the company through difficult times following a traumatic royal commission where AMP and its board lost the confidence of its customers and its shareholders … clearly, the board has not learned the lessons of the royal commission.”
Mr Liebler argues that the ASX is obliged to apply listing rule 11 and put the transaction to shareholders because the assets being disposed represent the company’s “main undertaking”. The ASX generally applies a 50 per cent rule of thumb when assessing such transactions.
He says that the divestment of the life business represents 50 per cent of shareholder equity, 92 per cent of net tangible equity, 86 per cent of annual revenue and 62 per cent of AMP’s net profit after tax.
Guidance note 12 of the ASX listing rules, however, state that when more than one transaction is announced they should be valued as a group. In this instance, this would include the proposed IPO of AMP’s New Zealand wealth operation, which has been conservatively valued at $400 million and would make the transaction even more significant.
AMP has been meeting with institutional shareholders to try and shore up support for the deal following a massive rout in the share price. AMP shares recovered some ground last week after as critics attacked the board and speculation of a potential takeover emerged.