Investors got it right in their reaction yesterday to the news of the competition regulator, the ACCC giving a second ‘ no’ to the NAB’s $13 billion bid for AXA Asia Pacific.
The much negotiated and postponed decision (it was pushed past the August 21 election) was revealed 10 months to the day since the AMP put AXA AP into play with an offer on November 9 of last year.
It was not unexpected.
It is a blow to the NAB – which is trying to build a wealth management giant (it already has MLC and the Aviva insurance business it bought last year) – and it is also a blow to the French parent of AXA (AXA SA), which has long coveted its Australian subsidiary’s Asian businesses.
Now, unless the NAB wants to push it further, it’s now up the AMP to launch a bid, but its weak share price is telling us the market doesn’t want that to happen.
AXA shares yesterday fell as punters and hedge funds (who really are punters in any case) realised the chances of a third bid from the NAB looks remote.
NAB shares rose sharply because investors appreciated that it won’t have to raise lots of cash and dilute current holders with another capital raising.
AMP shares closed steady (despite the stronger market) at $5.04 because investors are suspicious that a second attempt from it to buy AXA might prove too costly, especially with the AMP’s interim June 30 figures underwhelming the market.
AXA shares fell 10% at one stage, but finished down around 6.6%, or 36c, at $5.08. They had been as low as $4.86.
NAB shares jumped 89c to $24.84, or 3.7%, while AMP shares drifted 3c lower at $5.01, but then returned to close unchanged at $5.04.
AMP shares are down sharply from when it revealed its AXA play early last November.
There has been a steady erosion in its share price: the loss is around $1.36, or nearly 22%, a substantial vote of no confidence from the market, as well as a re-rating due to the slide in the market and the weak interim figures.
The loss is actually a bit more than that. AMP shares close at $6.77 on December 31, so the loss is a whopping $1.74, or 26%.
NAB shares are down as well; nearly 17% from the $29.83 around the time of its bid in late November and 10.9% from December 31 when the shares ended 2009 at $27.40.
The falls for both the AMP and NAB are substantially more than the drop in the overall market.
In both cases there are other factors behind the weakness, such as the indifferent market and in the case of the NAB, the rise in concerns about banks, especially European banks as the eurozone crisis unfolded in early 2010.
And AXA shares were trading around $4.16 just before the AMP sprung its offer, and they peaked at $6.72 in early January of this year, so there’s also been a very big loss ($1.64, or 24%) as the shares fell with the first NAB offer rejected in April and then a growing belief that the NAB’s attempts to find a way around that ACCC rejection would not work.
The ACCC killed off the second bid when it announced yesterday morning that it had rejected a deal by NAB to sell one of AXA’s key assets – the North wealth.net retail investment platform – to the much smaller fund manager, IOOF.
The commission said in its statement the sale and various undertakings given to maintain investment in the platform to help build IOOF into a major competitor to the industry’s bigger players did not provide “sufficient certainty” in addressing the ACCC’s concerns.
A separate 36 page document containing the detailed argument for the rejection was also released.
The ACCC said that the sale of North and the undertakings did not go far enough to re-assure it that there would not be a substantial lessening of competition in the retail investment platform market.
The platforms are used by financial advisers and planners to channel and manage their clients’ money into superannuation funds and other such investments.
The ACCC raised particular concerns about the impact of NAB owning the Navigator platform alongside North which both target sophisticated investors.
The sale of North to IOOF was designed to overcome those objections but the commission said that a majority of industry players who responded to the public soundings it had undertaken over a two week period last month were still strongly opposed to the NAB/AXA deal.
"The ACCC has considered the proposed undertakings and received information from a range of industry participants, including financial planners, dealer groups, investment product providers, and other market participants," the ACCC said.
"The majority of these participants raised concerns that the proposed undertakings would not provide for an effective competitive constraint on a merged NAB/AXA or other major platform providers.
"The undertakings as proposed place a heavy reliance upon IOOF having sufficient distribution capability to provide an effective competitive constr
