Fears of AMP's British spin-off

ANALYSTS fear that shares in the UK spin-off from Australian financial services group AMP could list at a 40% discount, echoing comments last week by the company's own chief executive.

Citigroup Smith Barney believes the float price for the new company, to be called HHG, will be about A$1.20 (50.3p) and said it could trade at a discount of more than 40% to the embedded value of its life business.

HHG will include the fund manager Henderson and three closed life companies - Pearl, NPI and London Life. At this level it would be valued roughly in line with life company Britannic.

There are worries that the UK business lacks investment appeal because it will not make a material return to shareholders for years. 'The risk that HHG could trade at a significant discount on listing makes it difficult to argue for aggressive pursuit of AMP at the current time,' Smith Barney said in a research report.

Last week AMP chief executive Andrew Mohl acknowledged that the issue could trade down as investors dumped HHG in favour of AMP's Australian and New Zealand businesses. But he said it would prove itself over time.

'HHG is like a good bottle of wine. It will need time to breathe and prove itself, but has real promise,' Mohl said.

Today the company moved to bolster support for the issue. Roger Yates, chief executive of HHG, said interest in the stock was high. He too tried to focus attention on long-term prospects, saying HHG was well placed to benefit from an economic and investment upturn.

'There's a lot of interest in HHG as an investment vehicle,' Yates told reporters and analysts. 'What we don't know yet is at what price that interest is there, and at what price people are prepared to buy the shares.'

The company confirmed plans to raise £100m in fresh capital through a global share offer after receiving approval from the UK Listing Authority. An institutional book-build by UBS and Cazenove will run from 15-22 December, and HHG is expected to list in London and Sydney on 23 December with net assets of £1.5bn.

AMP investors would receive one HHG share for every AMP share if the plan to split the Australian and UK operations is approved at a meeting on 9 December.

HHG will use £50m from the next month's capital-raising to buy a controlling stake in AMP Invest, parent company of the funds management business Henderson Global Investors. The remaining £50m would be used as working capital.