AMP’s friendly takeover of rival AXA Asia Pacific (AXA APH) has been given a boost, after an independent expert concluded the $13.3 billion offer was fair and reasonable and in the best interests of AXA’s shareholders.
The report and supplementary information, released yesterday total nearly 700 pages of information.
The finding brings success closer for the AMP in its bid because it has secured the support of AXA Asia Pacific’s independent directors, with the takeover offer to be put to vote of AXA APH shareholders at two meetings to be held on March 2.
Before then we get 2010 full year results from AXA APH on February 15 and AMP two days later.
In the document chairman Rick Allert said, "Your Independent Directors unanimously recommend that you support the Proposal in the absence of a Superior Proposal.
"The Independent Expert, Grant Samuel, has concluded that the value delivered to Minority Shareholders under the Proposal is compelling and that, in the absence of a Superior Proposal, the Proposal is fair and reasonable and in the best interests of Minority Shareholders," Mr Allert said.
The report reveals that: "The Independent Expert’s view is that the value to be delivered to AXA APH Minority Shareholders under the Proposal is compelling and is significantly more than would be available in the short to medium term if AXA APH was to continue on a standalone basis.
"AXA APH shareholders will clearly be better off if the Proposal proceeds than if it does not; and
"The break-up of AXA APH achieved by the Proposal optimises value, transferring ownership of the businesses to parties prepared to attribute substantially more value to the businesses than the valuations implicit in the market capitalisation of AXA APH prior to the announcement of the Initial Proposal.
"The Independent Expert has estimated the full underlying value of AXA APH (including a premium for control) to be in the range of $6.03 – $6.64 per AXA APH Share, meaning that the Proposal’s value of $6.43 per AXA APH Share falls within the valuation range estimated for AXA APH. The Independent Expert noted that its valuation range:
"Reflects the potential savings, synergies and other strategic benefits that could be available to acquirers of AXA APH;
"Exceeds the price at which, based on current market conditions, the Independent Expert would expect AXA APH Shares to trade on the ASX in the absence of the Proposal or other similar proposal; and
"Represents high multiples of earnings and high multiples of the Value of One Year’s New Business and embedded value, reflecting the strategic attractiveness of AXA APH’s businesses."
"A combination of the Australian and New Zealand Businesses and AMP will create Australia and New Zealand’s largest non-bank wealth management company in one of the world’s fastest-growing wealth management markets (the Australian wealth management market is the fifth largest in the world and expected to more than double in the next decade) and will be the market leader in retail superannuation, individual risk insurance and financial advice in Australia.
"You will still have exposure to the Australian and New Zealand Businesses."
The report warned that "If the Proposal is not implemented and there is no other proposal, the AXA APH Share price will likely trade at levels well below the value of $6.43 per AXA APH Share attributed to the Share Scheme Consideration".
The news saw AMP and AXA AP shares both enjoy small gains.
AMP shares rose, then fell to end steady at $5.18. AXA APH shares were up 1c at $6.40.
Under the takeover AMP has teamed up with the French group AXA SA to acquire AXA APH and split the business between them.
AMP will take over AXA APH’s Australasian business while selling the Asian operations to the French for $10.6 billion.
AMP welcomed the finding of the independent expert, saying it still expects the proposed merger between the wealth management giants to achieve synergies of approximately $120 million annually and for one-off integration costs to be $285 million.
If the merger pushes ahead AMP said it intends to continue its dividend policy of paying out between 75% and 85% of underlying profit to shareholders. However it cautioned pressure will remain on franking levels, given AXA APH’s lower franking capacity.
In addition to receiving shareholder and court approvals, the merger also remains subject to regulatory approvals, including from the Federal Treasurer.
