Sydney: Europe’s second-largest insurer, AXA SA, sought to double its bet on Asian growth on Monday, unveiling a planned $7 billion buy-out of its Asian assets and sale of its Australian assets to local rival AMP Ltd.
In order to help fund the buyout of the Asian assets, AXA SA said it would seek to raise €2 billion ($3 billion) through a right issue.
But AXA Asia Pacific’s independent directors rejected the main plank of the complicated deal, under which AMP would buy all of AXA Asia Pacific’s shares, including the French parent’s stake before selling the Asian assets back to AXA.
“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.
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 $10.3 billion, and then sell AXA Asia Pacific’s Asian assets back to the French parent for an undisclosed price.
AXA Asia Pacific’s independent directors said the proposal “significantly undervalued” the company.
“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.
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.
AXA Asia Pacific shares jumped 30% on news of the takeover bid, with the market punting on AMP and AXA improving the offer.
“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 $1 billion, sources told Reuters.
AMP’s cash-and-shares offer for all of AXA Asia Pacific, the first stage of the deal, implied a bid of A$5.43 per AXA Asia Pacific share, valuing the target firm at A$11.2 billion ($10.3 billion), based on AMP’s closing share price on Friday. AMP is offering a 26% premium to AXA’s close on Friday.
AMP is offering 0.6896 of its own shares plus A$1.3796 in cash for each AXA Asia Pacific share.
AMP said in a separate statement the proposal would value the Australian and New Zealand assets of AXA Asia Pacific at around A$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 $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 SA tried to buy out the minorities in AXA Asia Pacific five years ago but was knocked back.
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.