Global alternative investment manager Ares Management Corporation (NYSE: ARES) is to acquire 60% of AMP’s private markets business for $1.35 billion if a proposed deal goes ahead.

The proposal follows Ares earlier withdrawing a $6.36 billion indicative offer for the whole of AMP.

AMP (ASX: AMP) said on 26 February that it had entered into a non-binding ‘heads of’ agreement with Ares to pursue forming the joint venture in which it would retain 40%, valued at $900 million.

AMP has granted Ares a 30-day exclusivity period in which the parties will work towards a binding transaction.

Los Angeles-based Ares, which has a current market capitalisation of more than $US13 billion, invests globally in credit, private equity, and real estate.

AMP said the partnership would facilitate an acceleration of the growth of the private markets business while unlocking immediate value for AMP shareholders.

The individual private markets businesses to be involved in the deal are: infrastructure equity, infrastructure debt, real estate and other minority interests.

The joint venture is expected to raise debt of $500 million “to maximise capital efficiency” reducing the pro rata equity contributions for each party. Assuming this occurs, AMP’s expected capital returns would be boosted to up to $1.55 billion before separation costs and capital release.

AMP said the deal implied a total value for the entire current private markets business of up to $3.15 billion.

According to AMP, the joint venture would enable the private markets business to “benefit from Ares’ brand and global strengths in investment and distribution as well as already strong infrastructure and real estate capabilities and continue to build upon AMP Capital’s well-established processes and investment capabilities, improving its scale and potential growth trajectory”.

AMP chair Debra Hazleton and chief executive Francesco De Ferrari said they believed the proposed partnership with Ares “would strengthen the business and significantly accelerate our strategy to grow private markets while de-risking our international expansion plans and bring forward the value in AMP Capital for our shareholders”.

They added that the transaction would enable AMP to increase its focus on the transformation of its wealth management business in Australia, drive growth of AMP Bank and New Zealand wealth management.

Ares chief executive Michael Arougheti said Ares had been impressed by the growth of AMP Capital’s private markets business over recent years and saw the proposed partnership as enabling Ares to further expand its real estate and infrastructure capabilities.

AMP plans to retain ownership and operation of AMP Capital’s public markets businesses which, it noted in its announcement, made a “modest” net performance after tax (NPAT) contribution to the listed entity’s 2020 financial year performance. This would include transferring the multi-asset group to the AMP Australia entity.

Sale or partnership opportunities are continuing to be sought for AMP’s global equities and fixed income businesses.

AMP announced on 11 February that Ares had pulled out of negotiations to acquire its entire business at $1.85 per share.

Following that announcement, AMP’s shares fell from $1.54 to $1.37. The announcement that Ares planned to take a majority stake in the private markets business sent the shares up from $1.36 to $1.50.