France AXA eyes Asia growth with takeover bid

AXA Asia Pacific rejected a USD 10.3 billion bid from parent AXA SA and Australian rival AMP Ltd on Monday, an initial hurdle for the French insurer's bold ambitions to expand in Asia.

AXA SA, Europe's second-largest insurer said it would raise USD 3 billion to buy out its Asian assets in a two-stage deal which would see AXA Asia Pacific sold to AMP, then divided on geographical lines with the Australian firm keeping the Australia and New Zealand assets and selling the Asian assets back to AXA SA.

But AXA Asia Pacific's independent directors rejected the main plank of the deal saying the deal "significantly undervalued" the company.

AXA SA had tried to buy out the minorities in AXA Asia Pacific five years ago but was knocked back.

"They've obviously wanted to have at least some of the assets of AXA Asia Pacific for some time. They wanted to do it cheaply before and they're probably wanting to do it cheaply again," said Ross Barker, managing director of Australian Foundation Investment Co.

AXA Asia Pacific shares jumped 30% on news of the takeover bid, with the market punting on AMP and AXA improving the offer.

AXA SA holds its Asian operations through its stake in Australia-based AXA Asia Pacific Holdings but now wants to own these assets outright, doubling its exposure to Asian life insurance savings, including in China and India.

"The proposal has been received against the backdrop of recent weakness in global financial markets and before the growth of our Asian operations is fully reflected in our profitability," AXA Asia Pacific Chairman Rick Allert said in a statement.

With the buyout, AMP would buy all of the shares in the Asia Pacific unit, including the parent's 53% stake in a deal worth USD 10.3 billion, and then sell AXA Asia Pacific's Asian assets back to the French parent.

"The Asian assets are attractive," said Mark Daniels, head of Australian equities for Aberdeen Asset Management.

"That's one of the reasons why you'd hold AXA (Asia Pacific). They've got a very good business in Hong Kong and other Asian businesses are coming on track," Daniels added.

In a separate development, AXA's 15.6% stake in China's No.4 life insurer, Taikang, attracted foreign and domestic bidders, including Temasek and Blackstone, valuing the holding at more than USD 1 billion, sources told Reuters.

"A BIT LIGHT"

AMP's cash-and-shares offer for all of AXA Asia Pacific, the first stage of the deal, implied a bid of AUSD 5.34 per AXA Asia Pacific share, valuing the target firm at AUSD 11.2 billion (USD 10.3 billion), based on AMP's closing share price on Friday. AMP is offering a 26% premium to AXA's close on Friday.

AXA's shares surged 33% to close at AUSD 5.70, their highest since the collapse of Lehman Brothers.

AMP is offering 0.6896 of its own shares plus AUSD 1.3796 in cash for each AXA Asia Pacific share.

AMP said the proposal would value the Australian and New Zealand assets of AXA Asia Pacific at around AUSD 4 billion, based on AMP's closing share prices on Thursday.

The second leg of the deal would be for AXA SA to buy AXA Asia Pacific's Asian businesses from AMP for about USD 7 billion.

"Our view would be that it probably looks a bit light," Ross Barker, managing director of Australian Foundation Investment Co, AXA Asia Pacific's seventh-largest fund manager shareholder, said of the offer.

AXA Asia Pacific has operations in Hong Kong, China, India, Thailand, Philippines, Indonesia, Singapore and Malaysia, providing about two-thirds of total operating earnings.

The deal underscores AMP's hunger to grow wealth management business after losing out in a bid for British insurer Aviva Plc's assets to National Australia Bank Ltd earlier this year.

The Australian wealth management sector is poised to more than double over the next decade, backed by an ageing population, the country's mandatory superannuation pension scheme and the likelihood of continued strong economic growth.

But the industry also faces tough new regulations that could curb fee growth.

Australia's competition watchdog plans to review the AMP bid, which would put Australia's two biggest life insurers together, the Australian Competition and Consumer Commission (ACCC) said on Monday.

AXA is being advised by Macquarie Group while Deutsche Bank is advising AXA SA.

AMP is being advised by UBS, a source familiar with the advisory arrangements said.

(USD 1=1.083 Australian Dollar, 0.6718 Euro)