Nov. 9 (Bloomberg) -- Axa Asia Pacific Holdings Ltd., the Australian unit of France’s biggest insurer, rejected an unsolicited $10 billion bid from parent Axa SA and wealth manager AMP Ltd. in Asia’s largest takeover offer this year.

Sydney-based AMP bid A$5.34 in cash and stock for each share of Melbourne-based Axa Asia Pacific, 24 percent higher than the closing price on Nov. 6. Under the proposal, Paris- based Axa SA would sell its 54 percent stake in Axa Asia Pacific to AMP, and buy back the Asian units for A$7.7 billion ($7.1 billion), the companies said in a statement.

Axa Asia Pacific shares rose 33 percent, indicating investors expect a higher bid. The offer marks the second attempt by Axa SA to buy the unit in the past five years to tap rising wealth in the region. Axa and AMP must win approval from the unit’s independent directors and minority shareholders to carry out the purchase, the company said.

“This offer is not anywhere near acceptable,” said Rob Patterson, who helps manage $3.4 billion at Argo Investments Ltd. in Adelaide including Axa Asia Pacific and AMP shares. “It looks pretty low ball. The Asia business of Axa Asia Pacific is a growth option.”

Axa Asia Pacific jumped 33 percent to A$5.70 at the close in Sydney trading after Chairman Rick Allert said on a conference call with reporters he’s not prepared to accept an offer he considers too low.

“If they come back, then we’ll look at whatever they come back with,” Allert said on the call.

Share Sale

Axa Asia Pacific peaked at A$8.23 in November 2007 and in March fell below A$3 to the lowest since February 2004. It is up 15 percent this year. AMP added 4.3 percent to A$6.12. Axa SA fell as much as 3 percent and was down 7 cents to 16.81 euros at 1:32 p.m. in Paris, giving the company a market value of 35.1 billion euros ($52.6 billion).

“It’s a reasonable proposal and we are ready to discuss it,” Axa SA Chief Executive Officer Henri de Castries said on a conference call today. The French insurer wants to simplify the management of its Asian business and increase its earnings from emerging economies, he said.

Axa said today it will raise 2 billion euros in a rights offer to finance acquisitions. Investors will be offered one new share for every 12 existing shares and the capital raising will be priced at 11.90 euros a share, Axa said in a statement.

Asia Reach

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.

The company earns more than half its profit in Hong Kong and has ventures in the Chinese cities of Shanghai, Guangzhou, Beijing and Foshan, according to the Web site. In India, its venture has branches in Hyderabad, Mumbai, Delhi, Kolkata, Chennai and Bangalore.

The combined riches of millionaires in China, where the economy grew 9 percent last year even as the U.S. and Europe slipped into recession, overtook that of the U.K. to rank fourth, according to a report by Capgemini SA and Merrill Lynch Wealth Management in October. The wealth of Asia-Pacific millionaires will increase 8.8 percent annually until 2018, compared with a global average of 7.1 percent, the firms forecast.

Valuations

The independent directors said the bid didn’t reflect the unit’s growth potential, according to a statement from Axa Asia Pacific. Axa SA in October 2004 withdrew a A$3.4 billion offer for the 48 percent of Axa Asia Pacific it didn’t own after the unit’s independent directors rejected the bid as too low.

De Castries said at the time that Axa Asia Pacific wasn’t big enough to handle expansion opportunities in Asia, home to 60 percent of the world’s population.

“It will be extremely difficult for AXA AP to knock back another approach by its French parent,” Johan Vanderlugt, an analyst at Daiwa Securities SMBC Co. in Melbourne, wrote in a note today. “AXA AP in a stand-alone setting has insufficient scale to pursue the growth opportunities in Asia, particularly in China and India.”

The current bid consisted of 0.6896 AMP shares and A$1.3796 in cash for each Axa Asia Pacific share, the company said in its statement. AMP said it would pay A$4 billion for the Australian and New Zealand units and then sell the Asian assets to Axa SA.

M&A Resurgence

The implied earnings multiples for Axa Asia Pacific as a whole are 20 times 2009 earnings and 18.2 times 2010 earnings, Axa SA said in a statement. The offer from Axa SA values the Asian business at 18.3 times 2009 earnings and 19 times 2010 profit, it said.

That compares with an average 11.7 times price-to-earnings ratio for the shares over the past 12 months, according to data compiled by Bloomberg.

Australia & New Zealand Banking Group Ltd. paid around 11 times normalized 2008 earnings when it agreed to buy ING Groep NV’s stake in their life insurance and wealth-management venture in September, ANZ Bank said at the time.

AMP and Axa SA’s offer is the biggest for an Australian- based company since Westpac Banking Corp.’s May 2008 bid for St. George Bank Ltd., according to data compiled by Bloomberg. The offer is the second largest announced global financial services transaction this year excluding companies involving government bailouts, according to Bloomberg data.

“The companies that have come through the crisis best are reasonably cashed up and are looking at how to deploy that cash,” said Angus Gluskie, who oversees about $300 million at White Funds Management Pty. in Sydney, including AMP and Axa Asia Pacific shares.

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

Last Updated: November 9, 2009 07:35 EST