An AMP shareholder has levelled allegations against the company that its decision to sell its life insurance arm prompted “the worst share price reaction for a divestment amongst ASX100 listed companies in history”, calling on other shareholders to respond by voting against chair David Murray’s election at next month’s annual general meeting.
The shareholder, Merlon Capital Partners, who had been opposed to the sale of the insurance business from the outset, alleged that this was the biggest divestment by a company of that size ever entered into without shareholder approval. According to Merlon, the “vast majority” of divestments by top 100 companies exceeding 20 per cent of enterprise value, as this one did, had been taken to shareholders.
While Murray defended this on the ABC by saying that the board made the decision and the board was voted for by shareholders, Merlon pointed out that three directors were yet to be elected at the time the decision was made.
Merlon further alleged that when other companies had entered divestments of this size, the market had responded better when the transactions had been subject to shareholder approval mechanisms. It labelled the market reaction against this divestment as “unusual”, noting that AMP shares on Monday were worth $2.12 compared to $5.40 this time last year.
Commenting on Murray’s contribution to this decision, Merlon Capital Partners believed that the decision happened under his leadership. They suggested that the precedent for such loss was set when Murray was at the Commonwealth Bank, alleging that he “oversaw the destruction” of $53 billion of shareholders’ money in the acquisition of what was then Colonial Limited.
Adding further fire to its allegations, Merlon also claimed that AMP “appeared to have misled the ASX by providing data justifying its decision not to seek shareholder approval and prevent the ASX from doing so” when announcing the divestment.
“AMP’s approach to divesting assets sets a grim precedent in relation to the enforceability of ASX listing rules and governance practices amongst listed Australian companies,” Merlon analysts, Hamish Carlisle and Neil Margolis, wrote in a report entitled ‘Divestments and Shareholder Rights’.
“We simply cannot understand how proposing to divest such a large component of a company’s enterprise value without shareholder approval or an independent expert’s opinion can be considered appropriate or acceptable by any investor in Australian shares under any circumstances.”