Aussie investors shun AMP issue

AUSTRALIAN insurer AMP has been dealt a fresh blow as it prepares to sever ties with British offshoot HHG - the retail leg of its A$1.2bn (£510m) rights issue was under-subscribed by more than A$500m.

Only 100,000 of AMP's 990,000 retail investors are believed to have taken part in the capital raising, which AMP needs to fund the A$10bn separation of its Australian and British operations.

Remaining shares will be offered to fund managers in a two-day book build for the rights issue starting tomorrow.

AMP, valued at only A$8.75bn compared with A$20bn when it demutualised in 1998, traded for the last time today in its current form.

The shares are suspended during the institutional offer, and the new-look AMP will make its debut on Thursday.

Shares in HHG - which includes the closed Pearl Assurance, London Life and NPI life businesses, Henderson Global Investors and the financial advisory Towry Law - will list separately in London and Sydney next week.

Some brokers expect HHG shares to trade as low as A$0.75 at first, well below AMP's A$1.70-A$1.80 estimate.

Citigroup Smith Barney values the new AMP at A$5.40 a share, based on the possibility of a takeover from National Australia Bank, and HHG at A$1.10 at most.

Paterson Ord Minnett values HHG at A$1.46 a share, but said it was likely to trade 20-30% below that price.