Australia's competition regulator Monday opposed National
Australia Bank Ltd.'s (NAB) A$13.29 billion plan to buy AXA Asia
Pacific Holdings Ltd. (AXA.AU), a surprise decision that may pave
the way for rival AMP Ltd. (AMP.AU) to renew its offer for the
target.
Analysts had expected the regulator to approve NAB's bid,
possibly with conditions such as asset sales, after the bank last
month struck a deal with the target's French parent, AXA SA
(AXA).
But the regulator said that NAB's acquisition of AXA Asia
Pacific would substantially reduce competition in the retail
investment market.
"Allowing NAB and AXA to merge would significantly diminish
incentives to compete for retail investment platforms used by
investors that have complex financial needs," the Australian
Competition and Consumer Commission said in a statement late
Monday.
NAB's shares are expected to rise Tuesday on relief that the
bank won't need to conduct a large capital raising to fund the
acquisition.
RBS Head of Sales Justin Gallagher says NAB shares could rise as
much as 5.0% Tuesday, other things equal, given their recent
underperformance because of the prospect of large share issue to
fund the bid.
However, the rejection could leave NAB without a clear strategy
in wealth management, and could raise the chances it does a deal in
the U.K. NAB put in an indicative bid for 318 Royal Bank of
Scotland branches there, according to people familiar with the
situation.
The ACCC said it would allow AMP's rival proposal to buy AXA
APH--rejected by the target's board in December in favor of the NAB
bid--because AMP isn't a significant competitor in the market for
retail investment platforms, which are used to distribute
investment products to investors.
NAB had offered A$6.43-a-share in cash or a combination of
0.1745 NAB share and A$1.59 cash for AXA Asia Pacific shares.
Analysts have said that AMP will likely have to improve its
rejected offer of 0.6896 share and A$1.92 cash to win AXA Asia
Pacific board support for any new bid.
AXA Asia Pacific shares closed Monday down 3 cents at A$6.34.
The ACCC's announcement came after the end of trade Monday.
NAB can enter into further talks with the ACCC on the proposed
takeover, which would be the biggest in Australia's financial
services sector, ranking ahead of Westpac Banking Corp.'s (WBK)
purchase of St. George Bank Ltd. for A$12.37 billion in May 2008
and Commonwealth Bank's (CBA.AU) acquisition of Colonial Ltd. for
A$8.90 billion in March 2000.
The bank said it would review the ACCC decision in detail before
making any further comment.
AXA APH said if NAB can't reach an agreement with the ACCC
within six weeks, the deal between NAB, AXA SA and AXA APH can be
terminated by any of the parties.
NAB had planned to keep AXA APH's Australian and New Zealand
businesses, propelling it into a clear market-leading position in
the life-insurance and wealth-management industries in those
countries, with the largest network of financial advisers in
Australia.
AXA SA, which owns 53.9% of AXA APH, had agreed to sell its
shares to NAB and then buy back the Asian assets of the target, in
a deal similar to that previously struck with AMP.
AMP welcomed the regulator's decision.
"AMP continues to believe it can put forward a proposal that is
financially disciplined and will create value for its shareholders,
and which the independent directors of AXA APH will be able to
recommend to their minority shareholders," AMP said in a
statement.
AMP Chief Executive Craig Dunn has argued that an AMP-AXA APH
tie-up would create a "fifth pillar" in Australia's financial
services, with the potential to take on the dominance of the big
country's big four banks.
The market share of Australia's four major banks increased
during the global financial crisis as they snapped up weaker
competitors. Copping criticism last year for allowing Westpac
Banking Corp's takeover of St George Bank Ltd. and Commonwealth
Bank of Australia's acquisition of BankWest from HBOS PLC, ACCC
Chairman Graeme Samuel has warned the regulator would get tough on
financial services mergers.
However, Samuel Monday indicated that the competition watchdog
hasn't shut the door on further consolidation in Australia's
financial services sector involving any of the nation's big four
banks, and stressed the regulator makes its decisions based on
whether there is likely to be a substantial lessening of
competition in the market due to the merger proposal at hand.
"The...populist notion that we are concerned about the big banks
and we would oppose any transaction involving the big banks is not
something...that we take into account and is not part of our
consideration," Samuel told Dow Jones Newswires in an
interview.
The ACCC said in its statement Monday that AXA APH is on the
cusp of delivering an innovative investment platform that is likely
to provide aggressive competition, and that a merger of NAB and AXA
would remove competitive tension.
Either takeover proposal would also need the approval of the
Treasurer Wayne Swan. A spokesman for Swan declined to comment
Monday.
In a statement, AXA SA said it acknowledged the ACCC's decision
as well as the statements from NAB and AMP.
The French insurer pointed out that NAB has six weeks to address
the ACCC's concerns. It also acknowledged "AMP's announcement
earlier today indicating AMP's continued interest in a potential
transaction with AXA APH."
At 1129 GMT, SXA SA shares were down EUR0.38, or 2.2%, at
EUR16.65, underperforming the Stoxx Europe 600 insurance index.
-By Rebecca Thurlow and Lyndal McFarland, Dow Jones Newswires;
61-2-8272-4679; rebecca.thurlow@dowjones.com
(Cynthia Koons, David Rogers and Geoff Rogow in Sydney and
Jethro Mullen in Paris contributed to this article.)
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