Just over a year after it first bid but was pushed aside by the NAB, the AMP has returned to make a second attempt to buy AXA Asia Pacific Holdings with the latter’s French parent, AXA SA.
The new bid, which has been rumoured for several weeks after talks were renewed between the AMP and AXA’s French parent, was confirmed early yesterday.
The previous offer was launched on November 9, 2009 and a second, higher offer was made in December, only for the NAB to win because of its bid had a higher value.
The NAB offer was eventually halted by the competition regulator several months ago.
Now the AMP is back, with the way clear to pursue AXA APH.
The bid values AXA APH at $13.3 billion. Again there’s cash and shares, but with a different ratio.
The French company will underwrite the scrip part of the deal which means it effectively puts a floor under the AMP share price.
That means AMP will not have to launch an equity raising to support its bid, so that will make shareholders happier.
Under a deal unveiled last year and rebuffed by AXA Asia Pacific, AMP had offered $4.4 billion in cash and shares to a total value of around $13.3 billion for the businesses.
This time AMP will end up paying $4.15 billion for AXA APH’s local operations, which is actually less than the $4.41 billion it would have paid in the first 2009 proposal.
AXA SA now pays $10.43 billion for the Asia business. In 2009 it was to have paid $9.63 billion.
Even though the AMP is paying less, it is actually parting with more cash — $455 million against $315 million last year; and 38 million more shares.
The new bid structure will give AXA APH shareholders some upside if the AMP share price increases on the bid terms.
Under a scheme of arrangement proposal, AXA APH minority shareholders would receive at least $6.43 per share in value from AMP for each of their shares (which traded at $5.78 last Friday). The AMP shares ended Friday at $5.33, before the bids were revealed.
The AMP said yesterday, "The cash amount would vary so that AXA APH minority shareholders receive $6.43 in value if the AMP VWAP (Variable Weighted Average Price) was equal to, or greater than, $4.50 but less than $5.60. If the AMP VWAP was $5.60 or higher, AXA APH shareholders would receive 50% of the benefit of that higher AMP share price.
"If the AMP VWAP was below $4.50, the value of the Proposal would fall below $6.43 per share, with the total cash consideration capped at $3.15. If the AMP VWAP fell below $4.50 prior to the scheme meeting, AXA APH’s Directors would be entitled to terminate the agreements without a break fee being payable.
"AXA APH shareholders would continue to be entitled to receive a FY2010 final dividend of up to 9.25 cents for their AXA APH shares (provided the AXA APH Board declares such a dividend). AXA APH minority shareholders would not be entitled to receive AMP’s final FY2010 dividend in relation to AMP shares received under the Proposal."
Yesterday, when the trading halts were lifted, AXA shares bounced higher to end at $6.17, up 39c, or 6.7%, after touching $6.26.
The AMP’s shares rose 12c to $5.45.
AMP would buy AXA APH before merging the Australian and New Zealand businesses with its own operations, and then divesting the Asian businesses to AXA SA, which owns around 53% of AXA APH and has long wanted the assets.
The independent directors of AXA APH said in a statement yesterday that they were considering the new proposal and would update shareholders once they completed their consideration of the proposal.
The offer is expected to be approved by AXA APH’s board this week.
AXA APH’s stock price jumped some 4% at the end of last week in an anticipation of a new deal.
That was after discussions at the end of October between the AMP and AXA APH chairmen in Adelaide.
It’s a big price, literally a company defining deal, but AMP believes it is worth it because it will make it the biggest fund manager and player in wealth management in this country.
But we will get a similar situation to that in banking, a handful of big companies dominating an important part of a vital industry. And we will moan about that in the future, as well.
