MELBOURNE/SYDNEY Australian wealth manager AMP (AMP.AX) and French insurer AXA SA (AXAF.PA) launched a new $13.1 billion-plus bid for AXA Asia Pacific, a move set to challenge banks' domination of the world's fourth-largest wealth market down under.
A deal would put AMP at the top of Australia's $1.2 trillion wealth management market, and end one of Asia's largest takeovers that has dragged on for a year.
It would also allow AXA SA to exit Australia and help it to focus on its stated goal of growing in Asia, where businesses in eight countries contributed 60 percent of its operating earnings in the first half of 2010.
In a complex stock and cash deal, AMP will pay A$4.15 billion for AXA Asia Pacific's AXA.AX Australia and New Zealand business, while AXA SA will pay A$10.4 billion for the Asian assets, including taking over A$1.3 billion in debt.
"This should eventually close the deal," said Tom Elliot, Managing Director at Melbourne-based hedge fund MM&E Capital. "The AXA Asia board has no other bidders and the deal meets the price they want. The only issue is it is heavily scrip-based."
The current bid from AMP/AXA SA, which is A$539 million higher than their previous offer in December, will be on par with the National Australia Bank (NAB.AX) bid that was rejected by Australia's competition regulator in September.
AMP and AXA SA have offered at least A$6.43 per share for each share, representing a 10.3 percent premium to AXA Asia's Friday's closing.
The offer will be made of 0.73 AMP share plus a variable cash amount based on AMP's share price performance.
Shares of AXA Asia Pacific jumped 7.6 percent to A$6.22, to their highest level since May, while AMP shares rose 4.7 percent to A$5.58 and are on course for their highest close in 5 months.
"AXA Asia Pacific independent directors are yet to sign off on this revised offer. It is difficult for us to see how they could turn this down," said Andrew Kearnan, an analyst at Merrill Lynch.
Under the deal AXA SA will buy back the Asian business that spans Hong Kong, China, Singapore, Indonesia, the Philippines, Thailand, India and Malaysia.
Analysts said the deal would give AMP scale. Moreover, the warding off of constant speculation of the wealth manager being a takeover target more than mitigated the integration risks between AXA and AMP that focuses on tight cost-management.
The deal values AXA Asia at about 16 times forward earnings, on par with the price NAB paid for Aviva's (AV.L) Australian wealth business last year but more expensive than the 13.3 times Australia and New Zealand Banking Group (ANZ.AX) paid for the buyout of a wealth joint venture with ING ING.AS.
AXA Asia Pacific said its independent directors were considering the offer.
"AMP and AXA APH are natural partners to build a company that would have the scale and distribution to provide greater competition to the big banks in the wealth management market," AMP chief executive Craig Dunn said in a statement.
A combined AMP-AXA will top all segments of the Australian wealth management sector, from private pension management to retail management funds with a market share ranging from 19 to 24 percent in each sector.
The mature business profile and the challenge of taking on Australia's big four banks also kept at bay any foreign interest leaving AMP as the sole interested party.
AMP, which said the deal would be earnings neutral until 2012 and accretive thereafter, will not raise any equity for the deal but launch an A$600 million subordinated debt offering.
AMP is advised by UBS UBSN.VX and Greenhill Caliburn, AXA SA by Deutsche Bank (DBKGn.DE) and AXA Asia Pacific by Macquarie (MQG.AX)
(Editing by Lincoln Feast and Muralikumar Anantharaman)