Nov. 10 (Bloomberg) -- Axa SA, France’s biggest insurer, and Australian wealth manager AMP Ltd. may sweeten their bid for Axa Asia Pacific Holdings Ltd. to about A$12.4 billion ($11.6 billion) after a first offer was rejected, Citigroup Inc. said.

Axa SA, based in Paris, and Sydney-based AMP, whose first offer valued Axa Asia Pacific at $5.34 a share, may raise the bid to A$6, Citigroup analysts led by Nigel Pittaway said in a note. Gains yesterday by AMP’s stock swelled the value of the offer to A$5.64, Citigroup said.

“The next move seems likely to be a lift in the amount offered,” Pittaway wrote in the report. “One wonders for how long Axa Asia Pacific would then be able to hold out.”

Axa Asia Pacific soared in Sydney trading yesterday as investors bet on a second bid, and analysts at Credit Suisse Group AG and Royal Bank of Scotland Group Plc said they also expect a higher offer. Under the proposal, already Asia’s largest takeover offer this year, Axa SA plans to sell its 54 percent stake in Axa Asia Pacific to AMP, and buy back the Asian units for A$7.7 billion.

The current bid consists of 0.6896 AMP shares and A$1.3796 in cash for each Axa Asia Pacific share.

Sarah Hudson, a spokeswoman for AMP in Sydney, said today the offer is “fair value and compelling.” Axa Asia Pacific Chairman Rick Allert said through a spokeswoman that “their proposal has been rejected and therefore there is nothing on the table.” Laurent Secheret, a spokesman for AXA SA, didn’t immediately return a message left on his phone.

Axa Asia Pacific rose 1.2 percent to A$5.77 at the Sydney close after jumping 33 percent yesterday. AMP advanced 4.4 percent to A$6.39 following a 4.3 percent gain yesterday. Axa SA added 0.4 percent yesterday in Paris trading.

Bid Expectations

AMP could raise the stock component of the offer 4 percent to 0.7172 of an AMP share and still boost earnings by the third year after the acquisition, Arjan Van Veen, an analyst at Credit Suisse, said in a report.

Axa SA and AMP must win approval from Axa Asia Pacific’s independent directors and minority shareholders to carry out the purchase.

It may be “difficult” for those directors to reject a second offer of A$6 a share or more, John Heagerty, a Sydney- based analyst at Royal Bank of Scotland, said in a report. A second offer is “likely,” he said.

Axa Asia Pacific is responsible for Axa Group’s life insurance and wealth management businesses in the region. It has operations in Hong Kong, China, Singapore, Indonesia, Philippines, Thailand, India, Malaysia, Australia and New Zealand, according to the company’s Web site. It employs more than 2,300 people in Australia and New Zealand, and around 1,900 in Asia.

Standard & Poor’s cut its rating on Axa’s Australian and New Zealand units by two levels to A+, the fifth-highest investment grade, from AA, because of the offer.

“Even if the offer does not eventually go through, this indicates that Axa considers these subsidiaries non-strategic,” Standard & Poor’s said in a statement today.

To contact the reporter on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net

Last Updated: November 10, 2009 01:09 EST