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AXA announced today a joint offer with AMP whereby AXA would acquire 100% of AXA APH’s Asian businesses

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AXA announced that a joint offer was submitted by AMP and AXA to the AXA Asia Pacific Holdings (“AXA APH”) board on November 6, 2009.

AXA and AMP have entered into an exclusive arrangement whereby they have agreed that, if the offer is successful, AXA would take ownership of 100% of the Asian business and AMP would take ownership of 100% of the Australia & New Zealand business.

If successful, this offer would be equivalent to AXA selling its 54% stake in AXA APH’s Australia & New Zealand business while acquiring the 46% of AXA APH’s Asian operations that AXA does not own for a net cash payment of Euro 1.1 billion.

“This transaction would reinforce AXA’s growth profile by doubling its exposure to the Asian Life & Savings market and further optimize the corporate structure of the Group” said Henri de Castries, Chairman of the AXA Management Board.

“The proposed transaction offers to AXA APH’s minority shareholders a significant premium and the opportunity to become shareholders of a larger and stronger AMP Group which will permit them to share directly in the significant synergies that this transaction would create.”

Transaction structure & conditions

The joint offer submitted to the AXA APH board contemplates a Scheme of Arrangement pursuant to which:

  • AMP would acquire 100% of AXA APH’s outstanding shares for A$ 11.0bn (based on AMP stock price of A$5.75), with the objective of retaining and integrating the Australian and New Zealand operations (including the currently listed holding company). AMP would buy AXA’s shares in AXA APH for A$ 6.0bn in cash.
  • As part of the transaction, AXA would acquire from AMP 100% of AXA APH’s Asian operations for $A 7.7bn in cash, with the objective of increasing its exposure to high growth markets.

The price offered by AMP to AXA APH’s minority shareholders is $A 5.34 per share of which 26% would be paid in cash and 74% in AMP shares. This offer provides a 31% premium (vs. closing share price on November 5, 2009) to AXA APH’s minority shareholders.

Net cash consideration paid by AXA would be A$ 1.8bn (or Euro 1.1bn), corresponding to the difference between (i) the value of 100% of AXA APH’s Asian operations, and (ii) the value of 54% of AXA APH. As part of the transaction, AXA APH would reimburse the A$ 0.7bn internal loan granted to it by AXA and AXA would subscribe A$ 0.5bn of lower Tier 2 subordinated debt to be issued by AMP.

The transaction, if successful, would have the following impacts on AXA:

  • accretive on earnings per share in 2010,
  • -1 pt on Solvency I, which was slightly above 140%(1) at September 30, 2009,
  • +2 pts on debt gearing (2), which was 31% at June 30, 2009.

Subject to obtaining AXA APH’s independent directors’ recommendation for this proposal, completion of the transaction will also be subject to approval by AXA APH’s minority shareholders and customary regulatory approvals.

AXA has agreed to enter into an exclusivity arrangement with AMP for the purpose of this offer. The offer can be withdrawn by AXA and/or AMP at any time. Rationale of the transaction.

This transaction would double AXA’s exposure to high growth Asian Life & Savings markets with no integration risk.

The contemplated transaction would double Asia’s contribution (excluding Japan) to Group Life & Savings top line and earnings:

  • APE from 3% to 6%(3)
  • NBV from 12% to 21%(3)
  • Life & Savings underlying earnings from 6% to 11%(3)

In Asia, AXA APH is active in 8 countries and has a strong growth track record (+18% CAGR in IFRS Underlying Earnings over the last three years).

This transaction would also simplify AXA’s corporate structure in Asia, where the Group also holds both insurance and asset management businesses directly.