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AXA unit sale : Australia’s watchdog blocks bid a second time

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Australia’s competition regulator blocked National Australia Bank’s $12 billion bid for AXA Asia Pacific for a second time, dashing NAB’s efforts to cement its dominance in the world’s fourth-largest wealth management market. The decision clears the way 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.

The ruling dealt another setback to French insurer AXA SA’s plans to expand in Asia. It was set to pick up its subsidiary’s fast-growing Asian assets as part of the bid with NAB, as it looks to get a tighter grip on the region’s booming markets. AXA Asia Pacific’s shares tumbled as much as 10 percent to levels not seen since it was put in play late last year, as investors bet NAB, Australia’s top lender, would give up its nine-month fight for the company.

“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.

Australia’s top four banks, which hold dominant positions in everything from mortgages to life insurance, are looking to increase their sway over the $1.2 trillion wealth market. The country’s wealth market is seen growing more than 10 percent annually for the next five years on compulsory pension contributions, compared to loan growth of under 5 percent a year.

AXA SA, which owns 51 percent of AXA Asia Pacific, said it was reviewing its options on how to expand in Asia. The agreement between the French company, its unit and NAB expires on Thursday. A media report said AMP may make a fresh bid for AXA Asia Pacific as early as Friday. An AMP spokeswoman declined comment on the unsourced report by the Australian Associated Press and only said the AXA unit remained of strategic interest at the right price.

“We don’t know what our next steps are, it’s too early to say,” an AMP spokeswoman said.

Moreover, 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.

NAB, led by Cameron Clyne, a former state rugby player and an avid ocean swim racer, could contest the ruling, but analysts and investors expect the lender to bow out of what would have been the second-largest deal in Australia’s financial industry.

“We expect that NAB, after consideration, will likely let the deal rest now rather than challenge via the courts,” Citigroup analyst Craig Williams said.

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.

“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. With NAB and its big bank rivals unlikely to win competition clearance, the future of AXA Asia Pacific largely rests with its parent and AMP.