A surprise bid by National Australia Bank for the Australian and New Zealand businesses of AXA Asia Pacific generated some excitement in financial markets yesterday.
NAB, the owner of the Bank of New Zealand, announced it had agreed terms with AXA Asia Pacific (AXA AP) that valued the Australian and New Zealand businesses at $A4.6 billion ($NZ5.68 billion).
AXA AP chairman Rick Allert said he had been in touch with the group's main small shareholders about the acquisition proposal and was confident it would go through.
However, Craigs Investment Partners broker Chris Timms was not so sure.
By launching the bid, NAB had trumped AMP Ltd's plan to become the biggest superannuation and retirement provider after reaching agreement with AXA to buy the same assets.
NAB would effectively replace AMP as partner with AXA AP's majority shareholder, France's AXA SA, in the purchase of the businesses for about $A13.3 billion.
The deal hinged on AXA SA's support and it maintaining its net cash and financial contribution as outlined in its joint bid with AMP in return for AXA AP's Asian assets.
Mr Allert said he had spoken to AXA SA and the French company was thinking about its position.
AXA AP's independent directors supported the proposal.
Mr Timms said what made the NAB offer more attractive for shareholders was the cash component.
AXA AP shareholders would have the ability to elect to receive $A6.43 a share in cash or $A1.59 in cash and 0.1745 NAB shares for each AXA AP share.
Many of the small shareholders would have inherited their shares in the earlier demutualisation process and would be keen to sell.
"From a shareholder's point of view, cash will always win over a mixture of both cash and shares."
Asked if that meant AMP would give up in its bid to take over the businesses, Mr Timms said AMP had already lifted its offer once.
Depending on how much it wanted the AXA AP businesses, it could again put in a higher offer.
"The independent board is clearly doing its job in terms of soliciting more attractive offers. The game isn't finished," he said.
NAB chief executive Cameron Clyne said that AXA AP shareholders would also receive up to A9.25c in dividends for their shares in relation to the second-half results.
Holders of the new shares issued under the proposal would also to be entitled to receive NAB's interim dividend, payable in July 2010.
NAB was planning to raise about $A1.5 billion in equity to fund the deal, along with the scrip offer and existing capital resources.
NAB had conducted preliminary due diligence on AXA AP's Australian and New Zealand businesses.
It expected to complete final due diligence early in 2010 and to complete the transaction during the second quarter of the year.
"The proposed merger of our wealth business and AXA Australia and New Zealand will combine two successful and highly complementary businesses."
The proposed merger would achieve attractive scale benefits in the Australian superannuation, retirement income and insurance markets, Mr Clyne said.
It was consistent with NAB's strategy of expanding its wealth management franchise, most recently demonstrated through the acquisitions of Aviva Australia and a strategic alliance with JB Were.
"Integrating these businesses and AXA Australia and New Zealand is expected to deliver substantial synergy benefits and will provide a better outcome for customers and advisers with access to a broader range of quality investment and insurance products," he said.
An AMP spokeswoman said the company had not commented yet on the NAB proposal.
• Mr Clyne said the bank was in talks to offload its United Kingdom subsidiaries, Clydesdale and Yorkshire banks.
He told shareholders NAB had been approached by "a number of players in the UK market" over industry consolidation in the UK.
"These approaches indicate that in our Clydesdale and Yorkshire banks we have a high-quality asset that is an attractive platform for participation in UK market developments," Mr Clyne said at the bank's annual meeting in Brisbane yesterday.
"We are going to explore and assess what value these approaches offer for NAB shareholders."
