AXA targets Asia growth in spite of China snag

By Denny Thomas and George Chen

SYDNEY/HONG KONG (Reuters) - French insurer AXA (AXAF.PA) sought full control of its majority-owned Asian arm to get a tighter grip on the region's booming markets and stuck with plans to grow in China despite regulatory obstacles there.

The insurance market in Asia is growing faster than Europe and the United States, with Ping An Insurance (601318.SS) and China Life (601628.SS) among the top players in the region.

As part of its strategy to grow in Asia, AXA announced a two-stage deal on Monday to ultimately acquire full control of AXA Asia Pacific's (AXA.AX) most lucrative Asian operations.

First, AXA's regional Australian partner AMP (AMP.AX) will buy all of AXA Asia Pacific, including the 54 percent owned by parent AXA, in a deal valuing the target at about $10.3 billion.

AMP will then sell most of the business to AXA for about $7 billion, while keeping the Australian and New Zealand units. AXA said the deal would result in it making a net cash payment of 1.1 billion euros ($1.65 billion) for the Asian parts of AXA Asia Pacific.

AXA Asia Pacific rejected the proposal, saying it undervalued the business, but analysts said it was likely the parties involved would find an agreement.

The deal has an implied value of A$5.43 ($5.03) per AXA Asia Pacific share. The stock soared 32.5 percent to A$5.70.

AXA Chief Executive Henri de Castries said he was ready for further talks. "Our offer is a reasonable one, and we are always ready to talk," he told reporters.

Mandarine Gestion fund manager Fabienne Girard-Tokay said the deal would probably get done although AXA would not overpay.

"AXA Asia Pacific is one of the jewels in the crown and it's a very good idea to buy out the minority shareholdings," said Girard-Tokay, whose firm owns AXA shares.

AXA RIGHTS ISSUE

AXA will finance the buyout plan for its Asia Pacific subsidiary by a 2 billion euro ($3 billion) rights issue.

The rights issue was set as a 1-for-12 issue at a price of 11.90 euros -- a discount of around 30 percent to AXA's closing share price on Friday of 16.88 euros. AXA shares closed up 0.4 percent at 16.95 euros.

AXA said the cash could also fund acquisitions in other fast-growing areas, such as central and eastern Europe where AXA also plans to acquire full control of some local subsidiaries.

"AXA's exposure to fast-growing markets is weak," CM-CIC Securities said in a research note. "This deal, along with others made possible by the rights issue, will help AXA significantly increase its market share," added CM-CIC.