Axa SA and National Australia Bank Ltd agreed to buy asset manager Axa Asia Pacific Holdings Ltd for A$13.3 billion ($12.3 billion) in the second-biggest acquisition in Asia in the past year.
Paris-based Axa SA will pay A$9.4 billion for Axa Asia Pacific’s Asian businesses, while Australia’s biggest business lender will pay A$4.6 billion for the Australian and New Zealand assets, according to a statement today. Axa SA, Europe’s second- biggest insurer, owns 54 per cent of Axa Asia Pacific.
The agreement brings National Australia Bank nearer to winning a three-month takeover battle against AMP Ltd for a business that would help it close in on Commonwealth Bank of Australia in asset management. Chief Executive Officer Cameron Clyne still faces the prospect of a rejection by the Australian Competition & Consumer Commission, whose verdict is due next month.
“You’ve got the ACCC to get through, and you could get a left field result from that,” said Don Williams, chief investment officer at Platypus Asset Management Ltd, which manages A$1.8 billion. “Large mergers are tough things to integrate. It’s another reason not to own NAB.”
The purchase will allow, Axa SA, led by CEO Henri de Castries, to simplify the management of the Asian business as the company seeks to more than triple earnings from emerging economies to 15 per cent within three to five years. Larger German rival Allianz SE got about 12 per cent of its main insurance units’ operating profit from emerging markets in the first half of this year.
Axa Asia Pacific will use about A$700 million of the proceeds from Axa SA to repay debt owed by the Australian and New Zealand businesses to the French company. At the same time, Axa SA will offer to buy about A$600 million of bonds from National Australia Bank’s wealth-management business, according to the terms of the agreement.
Today’s agreement cements a provisional accord between National Australia Bank and Axa Asia Pacific reached in December, when the Melbourne-based lender trumped AMP’s A$12.9 billion bid. Both offers were similarly structured, leaving the eight Asian businesses to Axa SA. The French insurer began negotiating with National Australia Bank in February after an exclusivity agreement with AMP expired.
Under the terms of the agreement, Axa Asia Pacific’s minority shareholders can receive A$6.43 in cash for each of their shares, or A$1.59 in cash and 0.1745 of a National Australia Bank share for each of their shares. Those terms, which have the backing of Axa Asia Pacific’s independent directors, are unchanged from the December accord.
National Australia Bank will determine the need for any equity raising to fund the takeover based on the likely takeup of the stock and cash elements of the proposal, it said today. In December, the bank said it planned to partly fund the deal by raising about A$1.5 billion in equity.
Amid investor concern over the price of the purchase, National Australia Bank shares, which were halted from trading in Sydney today, have fallen 0.9 per cent since the offer was announced on December 17. In the same period, Westpac Banking Corp. jumped 19 per cent, Australia & New Zealand Banking Group Ltd climbed 18 per cent and Commonwealth Bank rose 7.8 per cent.
The acquisition would make National Australia Bank the country’s biggest manager of pension funds and money held by individual investors, according to the company. Commonwealth Bank’s Colonial First State had A$149 billion under management as of December 31.
The ACCC today deferred for a second time its ruling on AMP’s offer, which was rejected by Axa Asia Pacific and lapsed in December. The ACCC is still receiving relevant information and will decide on that proposal no later than April 22, rather than April 1, it said on its Web site. The ruling on National Australia Bank’s offer is also due April 22.
The watchdog has said that National Australia Bank’s proposal raises a “higher level of concern” than AMP’s offer, and said March 12 it needed more time to rule on the bids after asking for more information from the companies.
“It’s more likely than not it will get regulatory clearance,” Sean Fenton, who helps manage about A$850 million at Tribeca Investment Partners in Sydney, said about National Australia Bank’s offer. Fenton holds shares in both the lender and AMP.
National Australia Bank has said it expects its proposal to pass competition tests. AMP Chief Executive Officer Craig Dunn has called the ACCC’s findings “a key factor” in whether he decides to make a counteroffer.
Losing out to National Australia bank would “leave AMP in limbo and possibly vulnerable to a takeover,” Fenton said.
National Australia Bank’s managed assets in Australia and New Zealand would swell to A$144.3 billion if the deal is completed. Axa SA would win full control of its business in Asia, where wealth is growing faster than in any other region, according to Merrill Lynch & Co and GapGemini SA.
Axa Asia Pacific swung to its biggest profit last year since 2003 amid a global market recovery and higher demand for wealth-management services. Net income in the year to December 31 was A$679 million compared with a loss of A$279 million in 2008, the Melbourne-based company said in February.
Wealth managers are competing for a larger share of the market in Australia, already the fourth-largest pool of pension funds in the world. Australia’s managed funds rose 2.4 per cent in the fourth quarter to A$1.34 trillion, the Australian Bureau of Statistics said in February.
The biggest acquisition in the past 12 months is Prudential Plc’s March 1 agreement to buy an Asian life insurance unit from American International Group Inc for $35.5 billion.
