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Australia blocks NAB bid for AXA unit, clears AMP's
SYDNEY (Reuters) - Australia's competition watchdog blocked National Australia Bank's (NAB) (NAB.AX) $13 billion bid for AXA Asia Pacific Holdings AXA.AX, putting the agreed deal in limbo and allowing rival bidder AMP (AMP.AX) to make a comeback.
AXA Asia Pacific, owned 54 percent by French insurer AXA SA (AXAF.PA), is Australia's sixth-largest wealth manager and a hot takeover target in a $1 trillion market that is the fastest-growing part of the financial services industry.
The Australian Competition and Consumer Commission on Monday defied expectations it would give conditional approval for the NAB offer, instead issuing a flat rejection and saying an NAB takeover would hurt competition for retail investors.
However the regulator approved a lapsed A$13.1 billion cash and scrip offer from AMP, effectively breathing new life into a bid that had been all but written off.
The stage is now set for either NAB, Australia's top lender, to quickly restructure its offer to overcome the regulator's competition concerns or for AMP to bounce back with a new and higher offer. In order for either to succeed, they must win over not only AXA Asia Pacific's independent directors but also its French parent.
"It makes AMP's life easier but one needs to watch for NAB's response," Mark Nathan, portfolio manager at Fortis Investment Partners, said after the regulator's decision.
The regulator said an NAB takeover of AXA Asia Pacific would hurt competition by reducing the number of retail investment platforms in the market. These platforms enable people to manage their investments with the click of a mouse and are the glue that binds investors, their financial advisers and wealth managers.
BANKS ON BACK FOOT
"We think the 'investment platform' grounds for rejection is somewhat difficult to comprehend. Rather, we think that in an election year, the government would not be keen to see the major banks gain further market share," said Craig Williams, an analyst at Citigroup.
An NAB-AXA combination would have a 21 percent share of the retail funds market and 15 percent of the wholesale funds market, almost twice the size of the nearest competitor. The deal would be Australia's second-largest financial services deal ever.
AXA Asia Pacific said after the ruling NAB had six weeks to overcome the regulator's concerns or it could scrap the deal.
NAB, which has raised its focus on wealth management under CEO Cameron Clyne, said it would review the ruling, which came after the market close, before making any further comment.
Analysts expect NAB shares to stage a modest rally on Tuesday on hopes the bank may end its pursuit of AXA and stop being distracted. NAB shares have risen just 0.5 percent since the deal was announced in December, compared with gains of 12 to 18 percent for its main rivals.
AMP's stock is also likely to be cheered by investors as its chances for a deal have improved, but AXA Asia Pacific shares are expected to fall.
AMP, which let its exclusive agreement with AXA SA lapse in February, welcomed the regulator's decision and said it would come back with a fresh offer. Under both the AMP and NAB proposals, AXA Asia Pacific's Australia and New Zealand business would go to the winning bidder and the Asian business will remain with AXA SA.
"AMP continues to believe it can put forward a proposal that is financially disciplined and will create value for its shareholders, and which the independent directors of AXA Asia Pacific will be able to recommend," it said in a statement.
AXA SA said it acknowledged AMP's announcement of continued interest in AXA Asia Pacific, as well as the statements made by NAB and the Australian regulator.
"From the point of view of AXA it may mean surprisingly little ... AMP may now be able to improve its bid which (could be) identical to the one which NAB has made, or maybe a little bit better," said an analyst in Paris, wishing not to be named.
NAB can still restructure its offer to meet the regulator's concerns, some investors said.
"They can address the regulator by telling them they will divest retail platforms and ensure competition exists," one fund manager, who owns NAB shares, said on condition of anonymity.
(Additional reporting by Lionel Laurent in Paris; Editing by Mark Bendeich and David Holmes)
($1=1.081 Australian Dollar)
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