Australia regulator blocks NAB's $12 bln AXA bid-UPDATE 3

Trade the News

Thursday September 09, 2010 06:54:02 PM GMT

* Regulator says market test indicates NAB plan not effective

* Rival bidder AMP welcomes move, says too early for next step

* Time for NAB to walk away -investor

* AXA shares fall 10 pct to levels seen before it was in play

* AXA SA reviewing Asia expansion option (Updates shares, adds details, fund manager comments)

By Narayanan Somasundaram

SYDNEY, Sept 9 (Reuters) - Australia's competition regulator has blocked National Australia Bank's $12 billion bid for AXA Asia Pacific for a second time, dealing a blow to NAB's efforts to cement its dominance in the world's fourth-largest wealth management market.

The ruling sent AXA Asia Pacific's shares tumbling by a tenth to levels not seen since it was put in play late last year, as investors bet Australia's top lender would give up its nine-month quest for control of AXA Asia Pacific, a unit of France's AXA SA.

"I think it is time for NAB to move away from this bid. It has been nearly a year and they don't need more distractions," said Tom Elliot, Managing Director at hedge fund MM&E Capital.

The decision clears the deck for Australia's second-biggest fund manager, AMP, to take another tilt at AXA Asia Pacific after its cash and share offer was trumped by NAB in December last year.

But with a 25 percent fall in its share price so far this year, AMP may struggle to come back with an acceptable bid.

"It's hard for them to do a deal that would satisfy the board. That would be very hard from AMP's perspective," said Rohan Walsh, investment manager at Karara Capital, in light of AMP's weak share price.

AMP welcomed the ruling and said while AXA Asia Pacific was a strategic target it was too early to decide its next step.

NAB and AXA Asia said they were considering the implications of the ruling, while AXA SA, which owns 51 percent of AXA Asia Pacific, said it was reviewing its options on how to expand in Asia.

NAB shares rose as much 2.4 percent on relief it would not have to raise more equity. AXA Asia Pacific shares trimmed some losses to trade 8.5 percent lower at A$4.98, well below NAB's A$6.43 a share offer, while AMP shares were steady.

NAB's deal would have been the second largest in the Australian financial industry.

NOT ENOUGH

The Australian Competition and Consumer Commission last month agreed to consult the market on NAB's undertaking to sell AXA Asia Pacific's North Platform, which administers A$1.36 billion, to smaller wealth manager IOOF Ltd.

The regulator had blocked the deal in April in favour of AMP's offer, citing concerns over competition in retail investment platforms -- a portal that binds the wealth manager, financial products and customers.

Australia's top four banks, which hold dominant positions in everything from mortgages to life insurance, are looking to increase their sway over the $1 trillion wealth market that is seen growing at over 10 percent annually for the next five years on compulsory pension contributions, compared to loan growth of under 5 percent a year.

"The ACCC ... remains opposed because it would be likely to result in a substantial lessening of competition in the relevant retail investment platform market," ACCC deputy chairman Peter Kell said in a statement.

A combined NAB-AXA Asia Pacific would have a 21 percent market share in the retail funds market and a 15 percent share in the wholesale funds market, almost twice the size of the nearest competitor.

SETBACK FOR AXA SA, CLYNE

The ruling is also a blow to France's AXA SA, which is itching to shed its Australian operations and buy back its Asian businesses from the winner to concentrate on the fast-growing region.

If AMP does not come back with an acceptable bid, AXA SA may again try to buy out the minority shareholders in its Australian unit, which manages A$78 billion and last year reported its biggest profit since 2003. Its two previous attempts failed.

"They (AXA SA) are obviously still interested in the Asian assets. I'm not very sure what could be done on that front," Karara Capital's Walsh said.

For NAB Chief Executive Cameron Clyne, 42, who loves ocean swim racing and is the youngest of the Australian bank CEOs, the challenge is to explain to investors why he pursued a deal that looked a tough sell to regulators instead of strengthening his own unit.

Clyne, who took the top job in 2009, inherited a bank plagued with years of share market underperformance and a reputation among investors for overpaying for its acquisitions.

He spotted the wealth management opportunity and went about buying the Australian wealth units of Aviva and GoldmanSachs JB Were and was looking to finish with AXA Asia Pacific.

Under NAB's offer, AXA Asia Pacific shareholders could have opted to take A$6.43 in cash for each share they own or 0.1745 NAB shares and A$1.59 in cash. AMP had offered 0.6896 AMP shares plus A$1.92 a share in its lapsed bid.

JPMorgan and Nomura are advising NAB, while Macquarie is advising AXA Asia Pacific. Deutsche Bank is on France's AXA's side, while AMP is backed by UBS and Greenhill Caliburn. (Additional reporting by Sonali Paul and Miranda Maxwell in MELBOURNE; Editing by Ed Davies and Lincoln Feast)

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