Patience Gets AMP's Dunn Second Shot at Axa Asia Pacific as NAB Bid Barred
AMP CEO Craig Dunn
Ian Waldie/Bloomberg
Craig Dunn, chief executive officer of AMP Ltd.
Craig Dunn, chief executive officer of AMP Ltd. Photographer: Ian Waldie/Bloomberg
Axa Asia Pacific headquarters in Melbourne
Carla Gottgens/Bloomberg
The headquarters of Axa Asia Pacific Holdings in Melbourne's central business district.
The headquarters of Axa Asia Pacific Holdings in Melbourne's central business district. Photographer: Carla Gottgens/Bloomberg
Patience may be paying off for AMP Ltd. Chief Executive Officer Craig Dunn.
Ten months ago, wealth manager Axa Asia Pacific Holdings Ltd. rebuffed his A$12.9 billion ($11.9 billion) takeover offer in favor of a higher bid from National Australia Bank Ltd. The competition regulator’s rejection of that deal yesterday gives Dunn, 46, a chance to mount a second attempt that may cost less, said Daniel Toohey, an analyst at CLSA Asia Pacific Markets.
AMP, Australia’s second-biggest asset manager, said yesterday it’s still interested in Axa Asia Pacific, whose shares dropped the most in 18 months after the verdict. National Australia CEO Cameron Clyne will likely abandon his A$13.3 billion offer, which was too expensive, said analyst Brett Le Mesurier.
“That’s one piece of value destruction we don’t have to worry about,” Le Mesurier, lead analyst at Axiome Equities in Sydney, said of National Australia’s bid. “If you’re wondering who looks the smarter of the two, there’s no question it’s Dunn.”
As early as in February, two months after National Australia Bank agreed to buy Axa Asia Pacific, Dunn said the verdict by the Australian Competition & Consumer Commission would be key and there was “a long way to go.”
Jane Anderson, a spokeswoman for AMP, said Axa Asia Pacific “remains strategically attractive on the right terms.” Dunn wasn’t available to comment, she said. George Wright, a spokesman for National Australia, declined to comment.
Cash Wins
For Dunn and Clyne, the prize is a wealth manager with A$78.4 billion of assets, most of them in Australia. Under separate proposals, both planned to keep the Australian and New Zealand units and sell eight Asian divisions to Axa SA, the French insurer that owns 54 percent of Axa Asia Pacific.
National Australia’s A$6.43-a-share cash offer in December won over Axa Asia Pacific’s independent directors, who rejected AMP’s cash and stock bid. The competition watchdog then blocked Clyne’s approach twice, even as National Australia pledged to sell some of the target’s assets to ease antitrust concerns.
Axa Asia Pacific, which tumbled 6.6 percent yesterday, rose 0.4 percent to A$5.10 at the 4:10 p.m. close in Sydney today. National Australia slipped 0.7 percent to A$24.67 following yesterday’s 3.7 percent advance. AMP fell 0.8 percent to A$5.
Dunn can make a new approach without having to match his rival’s offer, said Colin Whitehead, an analyst at Fat Prophets in Sydney.
‘Extra Money’
“I don’t think it’s going to take a great deal for AMP to put something together that Axa Asia Pacific is essentially forced to accept,” said Whitehead. “NAB’s really been removed from play.”
AMP, which planned to sell the Asian units of Axa Asia Pacific to Axa SA for A$9.1 billion, may have to persuade the French insurer to pay more cash, said Peter Vann, who manages A$750 million at Constellation Capital Management Ltd.
“Axa Asia Pacific have made it very clear that there also needs to be either a cash bid or a cash option,” said Vann, who is based in Sydney. “AMP has got to talk to Axa SA again, because they’ll probably need a bit of extra money on the table.”
Should that fail, Dunn would need to sell shares to fund a new offer, a step AMP shareholders may resist, said Le Mesurier. “The consequential dilution would offset the benefits to profit from the acquisition,” the analyst said.
Scope to Raise
Axa SA, which is seeking full control of Asian units in a region where wealth is growing at the world’s quickest rate, said yesterday that it “will continue to review its options.”
AMP’s spurned December 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. Today, that offer is worth A$5.37 a share.
Bidding anew, AMP could afford to make an offer worth A$6.15 a share by increasing the stock component of the bid, and still avoid diluting earnings, Credit Suisse Group AG said in a report today. That assumes Axa SA continues to offer A$9.1 billion for the eight Asian divisions, Credit Suisse said.
Clyne, an ocean swimmer and ex-rugby player who took charge of Australia’s fourth-biggest lender by market value in January 2009, was pursuing Axa Asia Pacific to help offset a squeeze on profit margins brought on by higher funding costs.
With Axa Asia Pacific now an unlikely target, Clyne can still bolster profit by raising interest rates, said Constellation Capital’s Dunn.
Headwinds
“What the banks are facing now are some short-term headwinds,” he said. “If they have to pay more to borrow money, they’ll pass it through to customers. It’s that simple.”
Other opportunities for National Australia to buy assets are limited, according to Royal Bank of Scotland Plc.
“The ACCC decision highlights that competition concerns are likely to prevent any further intra-industry M&A opportunities for the major banks,” RBS said in a report dated yesterday. “We expect that NAB’s domestic strategy should now refocus on its organic banking and wealth-management franchises.”
To contact the reporter on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net
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