AMP was one company no one ever thought would be a takeover prospect. It was too big, too profitable. But as its share price headed south yesterday, the realisation came that the glory days are well over. Now the speculation is mounting: which Australian bank will make the first move to take the group over?

Its $2.6 billion write-down on its UK businesses, coupled with a $1.5 billion share issue to reinforce its financial position, was the best possible illustration that Chairman Peter Willcox and CEO Andrew Mohl are dealing with a bit of a disaster. The acquisition policies of former CEOs George Trumbull (GIO) and Paul Batchelor (Henderson, Pearl, National Provident, London Life and half of Virgin Money) are in tatters, and Messrs Willcox and Mohl had to do something drastic.

So they did. The British operations are being “demerged”, and all northern hemisphere operations will be united as a separate company under the Henderson name. AMP says Henderson will have $164 billion in assets under management and total capital of  $5.3 billion. It will be listed on the Australian sharemarket and AMP shareholders will be offered shares in Henderson later this year. The local operation will have $71 billion in assets.

Mr Mohl said that the actions announced last Thursday will give the company a “fresh start”.

So what went wrong? Mr Mohl was brutally frank at a Sydney press conference, admitting: “We paid too much for acquisitions and we put too much money into the UK.” He agreed there had been a “colossal loss of value”, and Mr Willcox backed that up by admitting that if they had put the UK operations on the block, “no one would have bought it”.

Mr Mohl thinks the UK acquisitions were “fairly ordinary”, but as long as the equity markets were booming they looked pretty good. When the markets began falling steeply last year, the house of cards collapsed. The UK business lost $714 million last calendar year. As Mr Mohl put it: “We have ridden a hell of a roller-coaster ride.

The $1.5 billion raising is planned to settle inter-company debt owed to AMP Australia and should also pay out external loans. Shareholders will get their chance to approve the break-up in a few months.

Not surprisingly, Standard & Poor’s has placed AMP on “Creditwatch Negative”. But S&P’s Credit Analyst Kate Thomson says there are some positive features of the restructuring plan including the influx of fresh capital and a reduction in debt, which could improve leverage and interest cover and reduced equity exposures in the UK.

However, Ms Thomson agrees the situation does have some pitfalls. A reduction in capital resources under the substantial write-downs announced, and some diminution in UK operations “make a difficult market environment”, she said.

Then there’s the big question about the banks. It shouldn’t be forgotten that the National Australia Bank made a $21 per share offer for AMP in 1999, but then Chairman Ian Burgess didn’t even bother referring it to the board. Today the group is worth a lot less than that, and Macquarie Equities told clients: “NAB is best placed to finance a potential transaction.” Other analysts think the banks will steer clear for the time being.

Describing the split-up of AMP as “daring, ambitious and courageous”, as Mr Mohl did, is perhaps gilding the lily a bit. Someone had to do something. The next few months will tell if this was the right thing to do.