Australia's competition regulator blocked National Australia Bank's 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 decks for Australia's second-biggest fund manager, AMP, to take another shot at Axa Asia Pacific after its cash and share offer was trumped by NAB in December.
The ruling sent Axa Asia Pacific's shares tumbling by a tenth 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 quest for control of the unit of France's Axa.
"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 wealth market that is seen growing at over 10 per cent annually for the next five years on compulsory pension contributions, compared to loan growth of under 5 per cent a year.
Axa, which owns 51 per cent 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 today.
A media report said AMP may make a fresh bid for Axa Asia Pacific as early as tomorrow. An AMP spokeswoman refused to speculate on the unsourced report by the Australian Associated Press and only said the AXA unit remained of strategic interest at the right price.
Moreover, with a 25 per cent 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.
NAB shares rose as much 4.6 per cent to a one-month high on relief it would not have to raise more equity. Axa Asia Pacific shares trimmed some losses to trade 8 per cent lower at A$5, well below NAB's A$6.43 a share offer, while AMP shares were steady.
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 per cent market share in the retail funds market and a 15 per cent share in the wholesale funds market, almost twice the size of the nearest competitor.
The ruling is also a blow to France's Axa, which is itching to shed its Australian operations and buy back its Asian businesses from the winner to concentrate on the fast-growing region.
If AMP does not come back with an acceptable bid, Axa may again try to buy out the minority shareholders in its Australian unit, which manages A$78 billion and last year reported its biggest profit since 2003. Its two previous attempts failed.
Reuters