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The way is open for National Australia Bank Ltd (NAB) to
negotiate with AXA SA for the takeover of AXA Asia Pacific Holdings
Ltd (AXA APH), after AMP Ltd's exclusivity agreement with the
French life insurance giant expired over the weekend.
That doesn't mean NAB will automatically be a winner, as it needs
to thrash out transaction details with AXA SA, pass muster with the
competition watchdog and come up with the money to pay its portion
of a potentially all cash transaction of $13.29 billion.
Once a takeover is completed, NAB will then have to work hard to
integrate AXA APH's businesses so the takeover, which the
Melbourne-based bank itself says is "not cheap", makes financial
sense.
Wealth manager AMP said on Monday it was considering its options in
relation to AXA APH after its exclusivity agreement with AXA SA
terminated on February 6.
"As the agreement has terminated, AXA SA is no longer an associate
of AMP and therefore AMP is no longer a substantial holder in AXA
Asia Pacific Holdings Ltd," Sydney-based AMP said in a
statement.
AMP would probably need to look elsewhere for expansion plans,
Southern Cross Equities analyst TS Lim said.
"They've been snookered on this one," he said.
"They need to look out for secondary opportunities and they will
probably look into Asia."
A fund manager, who declined to be named, said there was a good
organic growth story at AMP, which chief executive Craig Dunn
wasn't necessarily being given credit for.
The prices AMP and NAB offered for AXA APH were also very high, and
it was going to be difficult for either company to make it
financially worthwhile, particularly in the near term, the fund
manager said.
Lim said it was a long term deal for NAB, and it would take time to
see the benefits.
"This is a strategic acquisition," he said.
A successful AXA APH takeover would make NAB the country's biggest
superannuation provider, as well as the largest business bank and
life insurer. Clyne had said there was a significant opportunity to
cross sell life products to business banking clients.
Over the weekend, there were reports that NAB had sent a
negotiating team to Paris to start talking to AXA SA.
NAB spokesman George Wright and AXA SA's local spokesman Matt
Pollard declined to comment on Monday.
While NAB won over AXA APH's independent directors with its
all-cash offer of $6.43 a share, AMP had already negotiated the
details of how AXA APH would be divided with majority shareholder
AXA SA.
NAB will now need to navigate that.
Investors will also be watching the Australian Competition and
Consumer Commission's (ACCC) report on AMP this Wednesday for the
regulator's view of the takeover proposal. The ACCC will report its
findings on NAB's proposal on March 18.
Lim said the ACCC would probably allow the takeover, possibly with
some undertakings, given the wealth management market was still
fragmented.
Under both AMP and NAB's bids, AXA SA would acquire AXA APH's Asian
assets, while the partner in the takeover would take the Australian
and New Zealand businesses.
NAB proposed raising $1.5 billion from shareholders to help fund
the takeover, with the rest coming from exiting cash and the scrip
portion of the offer.
NAB may find that it has to pay more cash than it expected, given
its cash and scrip offer now values AXA APH at about $6.03 a share,
40 cents less than the cash offer. Investors who took the all-cash
offer would miss out on NAB's interim dividend payment.
Paying more cash would then make it harder to make AXA APH add to
NAB's earnings per share in the near term, given Clyne had
described the existing price in December as not particularly
cheap.
On Monday, shares in NAB gained 16 cents, or 0.63%, to $25.47, AMP
added 10 cents, or 1.63%, to $6.25 and AXA APH ended steady on
$6.45.
