National Australia's Axa Bid Is Blocked by Regulator
NAB's A$13.3 Billion Axa Bid Is Blocked
Carla Gottgens/Bloomberg
The headquarters of Axa Asia Pacific Holdings in Melbourne.
The headquarters of Axa Asia Pacific Holdings in Melbourne. Photographer: Carla Gottgens/Bloomberg
National Australia Bank in Melbourne
Carla Gottgens/Bloomberg
The National Australia Bank office tower in Melbourne.
The National Australia Bank office tower in Melbourne. Photographer: Carla Gottgens/Bloomberg
National Australia Bank Ltd.’s planned A$13.3 billion ($12.2 billion) takeover of asset manager Axa Asia Pacific Holdings Ltd. was blocked a second time by the regulator, clearing the way for AMP Ltd. to renew its challenge.
National Australia’s plan to overcome the competition watchdog’s objections by selling Axa Asia Pacific’s North investment platform, an online portal overseeing A$1.4 billion of funds, wasn’t enough, the Australian Competition & Consumer Commission said. It first barred the agreed deal on April 19.
“National Australia Bank may well be reaching the point where they walk away,” said Angus Gluskie, who manages about $300 million at White Funds Management Pty in Sydney including shares in the bank. “Further concessions are likely to reduce or eliminate the potential benefits from a transaction.”
Axa Asia Pacific shares tumbled the most in 18 months in Sydney trading on speculation any new bid from AMP, Australia’s second-largest asset manager, will be lower than its spurned Dec. 14 offer. National Australia had its steepest gain in three months as concern eased that the bank will have to sell stock to fund the purchase, which some analysts had judged expensive.
Sydney-based AMP today reiterated that Axa Asia Pacific is attractive “on the right terms.” AMP is “pleased” with the regulator’s verdict, Amanda Wallace, a spokeswoman, said in an interview.
Trumped Offer
Axa Asia Pacific fell 6.6 percent to A$5.08, the biggest decline since March 6, 2009. National Australia rose 3.7 percent to A$24.84, the largest gain since June 3. AMP was unchanged at A$5.04.
Under their proposals to buy Axa Asia Pacific, AMP and National Australia both planned to keep the target’s Australian and New Zealand businesses and sell the remaining eight Asia divisions to Axa SA, the French insurer that owns 54 percent of Axa Asia Pacific.
AMP on Dec. 14 bid A$12.9 billion for Axa Asia Pacific. That offer, which was approved by the regulator, was trumped three days later by Melbourne-based National Australia, the country’s fourth-largest lender. The two bidders squared off over a wealth manager that oversees A$78.4 billion, mostly in Australia, and last year posted its biggest profit since 2003.
‘Green Light’
“The likelihood of AMP coming back with a revised offer lower than its lapsed bid is real,” said Daniel Toohey, an analyst at CLSA Asia Pacific Markets in Sydney. “The French must surely be losing patience. AMP has got the green light. If I was AMP, I’d be trying to squeeze as much as I could out of the French.”
Axa SA had planned to buy back the Asian units of Axa Asia Pacific from AMP for A$9.1 billion.
Axa fell as much as 39 cents, or 3 percent, to 12.63 euros in Paris trading was at 12.78 euros by 11:22 a.m. Europe’s second-largest insurer has dropped 23 percent this year, the third-worst performance in the 29-member Bloomberg Europe 500 Insurance Index.
“It is Axa’s strategy of redeploying in Asia that is at stake,” Jean d’Herbecourt, a Paris-based analyst at CA Cheuvreux who has an “outperform” rating on the stock, wrote in a note to investors today. “Axa runs an industrial risk with a subsidiary that has now been up for sale for more than eight months.”
AMP’s Dec. 14 offer of 0.6896 AMP shares and A$1.92 in cash for each Axa Asia Pacific share valued the target’s stock at A$6.22. Since then, declines by AMP shares have dragged down the value of that offer to A$5.40 a share.
‘Considering Implications’
National Australia Chief Executive Officer Cameron Clyne pursued Axa Asia Pacific as higher costs of raising funds for his lending business weighed on profit margins. At the same time, a rebound in demand for business loans may be delayed until next year as doubts about the global economic recovery rattle confidence, he has said.
The lender “is considering the implications” of the regulator’s decision and will issue an update as soon as possible, it said in a statement. Paris-based Axa is disappointed with the verdict and is reviewing its options, said Matt Pollard, a spokesman for the company at public relations firm Kreab Gavin Anderson in Melbourne.
Driving the April decision by ACCC Chairman Graeme Samuel to block the deal was concern that control of Australia’s so- called retail investment platforms would be too concentrated. The investment platforms’ software-driven portals are used by wealth managers and financial planners to sell products like life insurance, deposits and pensions.
Competition Concerns
Following that preliminary rejection by Samuel, National Australia offered to sell Axa Asia Pacific’s North platform to IOOF Holdings Ltd., a Melbourne-based investment manager with a market value of A$1.5 billion, to appease the regulator.
“The proposed undertakings offered by the parties do not provide sufficient certainty that the ACCC’s competition concerns will be addressed,” ACCC Deputy Chairman Peter Kell said in today’s statement.
According to the ACCC, about 80 percent of investment flows in Australia are channeled by financial planners through those platforms. The regulator has called them “the gatekeeper” of wealth-management products and services.
“The ACCC wants to preserve what little competition there is,” said Peter Swan, finance professor at the Australian School of Business in Sydney, part of the University of New South Wales. “They’ve been persuaded there is too much concentration in this area.”
New Platform
National Australia, which owns its own platforms, would have held double the amount of funds under administration than its closest rival, according to the ACCC. Axa Asia Pacific was also “on the cusp” of setting up a new platform that would have broadened competition, the ACCC said.
Axa Asia Pacific handles Axa’s life-insurance and wealth- management businesses in the region, with units in Hong Kong, China, Singapore, Indonesia, the Philippines, Thailand, India, Malaysia, Australia and New Zealand. Axa SA is seeking full control of units in a region where wealth is growing at the world’s quickest rate.
To contact the reporter on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net
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