UPDATE 2-Australia's AMP says Ares pulls buyout offer, shares tumble

* Ares withdraws buyout offer for whole firm overnight

* Review of wealth management and banking unit ends

* ‘Most prized’ asset AMP Capital still under review, Ares engaged

* Investors will be concerned if only most valuable asset sold-UBS

* Shares fall over 10% to A$1.37 vs Ares withdrawn offer of A$1.85 (Recasts, adds shares, CEO comment at media call, analyst comment)

SYDNEY, Feb 11 (Reuters) – AMP Ltd said on Thursday Ares Management had withdrawn its buyout offer for the Australian wealth manager overnight, as it posted a 32% fall in annual profit on heavy cash outflow from its flagship arm.

Ares had been the only known party to table a bid for the whole firm after scandal-plagued AMP announced a portfolio review of all its businesses last year, including a wealth management business, a bank and an asset manager.

Sydney-based AMP said it had concluded the review of its wealth management and banking divisions, but continued to evaluate AMP Capital, considered its most valuable unit. Ares was “engaging” with AMP as part of that process.

Representatives from Ares did not immediately respond to requests for comment.

“The completion of the asset review (with) Ares not proceeding with offer, on all assets except for AMP Capital will concern investors who need a complete sale and not a sale of the most prized asset only,” UBS analysts said in a note.

Shares in AMP, for which Ares had offered A$1.85 each, fell 10.7% to A$1.37 in early trade.

AMP Chief Executive Francesco De Ferrari told journalists the company wanted to finalise the review process “as soon as possible” although he gave no time frame. He added that AMP also could decide to retain AMP Capital.

“We’re very convinced of our strategy, the opportunity to re-pivot to real assets,” he said.

The company reported that underlying profit for 2020 fell to A$295 million ($227.8 million) from A$439 million a year ago, and that net cash outflows from its wealth management business rose 32% to A$8.3 billion.

A government scheme allowing workers to draw on their retirement savings during the coronavirus pandemic had accelerated those outflows.

AMP said it was “committed” to resuming dividend payments this year, as it sought to return cash to investors from the sale of its Life Insurance unit.

AMP has struggled to repair its reputation since a public financial sector inquiry in 2018 exposed systemic wrongdoing at the company.

With “earnings not recovering, the turnaround story for AMP is harder to see,” UBS said.

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