We believe the ASX is failing to protect the rights of investors.
When Australia’s largest wealth manager AMP Ltd announced it would sell its life insurance arm at a discount to its previously disclosed embedded value, we, and others, initially spoke out against the controversial deal on valuation grounds.
Fast forward two weeks and it was just plain wrong that, despite concerns from shareholders, the ASX ruled, not once but twice, that AMP’s decision to sell its life business did not require shareholder approval, as per its listing rules.
In this instance, it appears that the ASX is favouring a select group of advisers ahead of shareholders. You cannot have a functioning market unless shareholder rights and governance are at the forefront, and this is a blatant example of where this has fallen over.
The businesses sold accounted for well in excess of half of the total value of AMP in the eyes of the sharemarket. This is evidenced by its pre-sale market capitalisation of approximately $10 billion, the 25% fall in market capitalisation on the day of the announcement and the total proceeds of $3.1 billion. These proceeds plus the fall in stock market capitalisation as a result of this deal, accounted for more than 50% of the pre-deal market capitalisation – a clear indication that this was a material transaction and AMP’s main undertaking.
We are well known for our independent, long-term, contrarian investment approach. We are active shareholders and have always approached regulators to ensure client interests are met. We will continue to do so.
We remain committed to canvassing for change as the status quo is far from ideal. The ASX can and should do better with their rules, how they are applied and the instances in which it uses its discretion.
Simon Mawhinney is the Managing Director and Chief Investment Officer at Allan Gray Australia. He holds a Bachelor of Business Science (First Class Honours) with majors in Finance and Business Strategy and a Postgraduate Diploma in Accounting (University of Cape Town). Simon qualified as a Chartered Accountant in 1998 and is a CFA Charterholder.