UPDATE: Australia's ACCC Maintains Opposition To NAB's Bid For AXA Asia Pacific
September 09 2010 - 12:14AM
Dow Jones News
Australia's competition regulator continued its opposition to
National Australia Bank Ltd.'s (NAB) proposed A$13.3 billion bid
for wealth management company rival AXA Asia Pacific Holdings Ltd.
(AXA.AU) on Thursday, dealing a heavy blow to the bank's plans to
become the country's largest wealth manager.
The latest development in the complex plan by Australia's
fourth-largest bank to split the regional assets of the affiliate
of French insurer AXA SA (AXAHY) also likely stalls AXA's Asian
expansion plans but may open the door for spurned suitor AMP Ltd.
(AMP.AU) to resuscitate its bid, after NAB's efforts to overcome
the regulator's concerns fell short of the mark.
The Australian Competition and Consumer Commission maintained
its April 19 rejection of what would be the biggest deal in
Australia's financial services history, arguing it would crimp
competition in the market for supply of retail investment
platforms--internet portals that link retail investors with the
wide range of investment products that fund management companies
provide.
ACCC Deputy Chairman Peter Kell said in a statement that
undertakings proposed by the bank and AXA APH to onsell the
target's fledgling investment platform North to a smaller local
wealth manager, IOOF Holdings Ltd. (IFL.AU), "do not provide
sufficient certainty that the ACCC's competition concerns will be
addressed".
Because IOOF lacks the infrastructure needed to make North a
competitive force to NAB's Navigator and other market participants'
platforms in its own right, NAB had also promised to provide IOOF
with financial support and technical expertise, and to channel
business its way for three years.
However the ACCC said because NAB and AXA APH have not agreed to
include the distribution network of financial planners or to sell
the financial products that currently support the North platform to
IOOF, there was "considerable uncertainty" that IOOF could become
an effective competitor to the combined NAB-AXA.
"The undertakings as proposed place a heavy reliance upon IOOF
having sufficient distribution capability to provide an effective
competitive constraint upon existing key players in the foreseeable
future," said Kell.
Under NAB's proposal, 55% owner AXA SA would retain the
lucrative Asian assets of AXA APH, while NAB would pay minority
shareholders either A$6.43, or 0.1745 NAB shares and A$1.59 for
each AXA APH share and take ownership of the Australian and New
Zealand businesses. NAB won the necessary support of AXA APH's
independent directors in December, trumping a lower cash and shares
bid from AMP, which would also see the target split along the same
geographic lines.
Shares in AXA APH fell sharply on open, and at 0340 GMT were
down 8.6% or 47 cents at A$4.97, with Goldman Sachs saying NAB is
now likely to throw in the towel on its bid.
"In our view, the most likely option is for NAB to walk away and
pursue an organic acquisition strategy of advisors rather than a
large acquisition," Goldman Sachs analyst Ben Koo said in an early
note to clients.
NAB shares rallied on the outcome, up 3.8% at A$24.87, and while
Koo said it is possible the bank could challenge the decision or
seek to include financial planners in the deal with IOOF, it still
may not change the outcome.
"In the near term, fears of a large capital raising will now
dissipate for NAB however M&A uncertainty will remain an
overhang until NAB clarifies its response to the ACCC decision,"
said Koo.
NAB said earlier it is considering the implications of the
decision and will update the market "as soon as possible".
Unsurprisingly, most of the other major players in the deal also
said they would take some time to consider their position before
commenting on next steps.
A spokesman for AXA SA said the French parent was disappointed
with the ACCC findings but will review the decision more fully
before making further comment, while AXA APH said in a statement
that it "notes" the decision but a spokeswoman wasn't immediately
available for further comment.
For its part, AMP said it welcomed the decision and continues to
see AXA APH as an attractive strategic target but sees no urgency
to make any quick moves. A spokeswoman for AMP said whether the
group will seek fresh talks with AXA SA is "a decision for another
day".
Goldman Sachs analyst Ingrid Groer said AMP "is most likely to
play it tough and try to transfer the pressure onto the AXA APH
board" that rejected its November offer of 0.6896 AMP shares and
A$1.92 cash for each AXA APH share.
Groer said AMP has indicated it won't move to an all-cash offer
nor push its bid, which has already been cleared by the competition
regulator and is currently valued around A$5.37 per AXA APH share,
much higher, so is unlikely to win the support of the target.
"Although, this offer will remain on the table and AXA APH
shareholders may begin to pressure the board if the stock sells off
and the price begins to languish at much lower levels," she said in
a note to clients. AMP shares are down 3 cents at A$5.01.
Meanwhile, AXA SA is likely to be "very frustrated and very keen
to find a way to get its hands on the Asian assets," said Groer,
which could see AXA SA either assist AMP in bumping up its offer or
even engineer a break up itself.
-By Bill Lindsay, Dow Jones Newswires; 61-2-8272-4694;
bill.lindsay@dowjones.com
Insignia Financial (ASX:IFL)
Historical Stock Chart
From Nov 2024 to Dec 2024
Insignia Financial (ASX:IFL)
Historical Stock Chart
From Dec 2023 to Dec 2024