AXA Asia Pacific Profit Upgrade Stirs Talk of Higher Bid

By | January 21, 2010

Life insurer and fund manager AXA Asia-Pacific Holdings Ltd expects to report a forecast-beating profit for 2009, putting pressure on rival bidders to raise their offers in a $12 billion battle for the company.

AXA Asia-Pacific, which is being circled by National Australia Bank (NAB) and a rival consortium of fund manager AMP and French parent AXA SA, said in its trading update full-year earnings were expected to be ahead of market consensus.

“The forecast is generally positive and that would sharpen the need for both the acquirers to consider upping their bid,” said Michael Heffernan, a strategist at securities firm Austock Group.

The news pushed AMP shares up 2.5 percent on Thursday, while NAB slipped 1 percent. Some traders said AMP was unlikely to raise its joint bid, improving NAB’s chances of winning.

NAB’s proposal will give AXA Asia-Pacific shareholders either A$6.43 [US$5.83] cash per share or A$1.59 [US$1.44] cash and 0.1745 of a NAB share. AMP and AXA SA have offered 0.6896 AMP shares plus cash of A$1.92 [US$1.74] per share.

A key player in the $900 billion Australian wealth management industry, AXA Asia-Pacific was put in play in November after AXA SA joined AMP in making a cash and stock offer.

Analysts said it is too early to say by how much the bids could be raised since NAB’s offer has already been accepted by AXA Asia-Pacific’s board and AMP has termed its proposal ‘best and final’.

AXA Asia-Pacific shares rose as much as 0.3 percent in early trade but then retreated to be flat at A$6.60 [US$5.98], still above the two offers.

It said calendar 2009 profit after tax and non-recurring items would come in at about A$675 million (US$611.72 million), which compares with the A$552.6 million [US$500.8 million] mean net income forecast from Thomson Reuters I/B/E/S, and which, analysts say, could alter the takeover math.

It posted a loss of A$278.7 million [US$252.5 million] a year ago.

AXA Asia-Pacific’s appeal to the suitors was that it is one of the last remaining consolidation opportunities in Australia’s financial services sector, analysts said.

NAB entered a month later, aiming for a stronger presence in an industry that promises rapid growth as the population ages and the government considers raising compulsory retirement savings.

The Australian competition regulator said earlier this week it has opened an informal review of the NAB offer as certain areas of life insurance, pension, wealth management and advisory products overlapped for the two firms.

AXA Asia-Pacific joins Commonwealth Bank of Australia, Flight Centre and Computer Share in upgrading profit forecasts as the local economy rebounds from the global financial crisis.

“We have responded well to the impact of the global financial crisis and the earnings of all of our businesses have accelerated since the first half of 2009,” AXA Asia-Pacific Chief Executive Andrew Penn said in the trading update.

The Australian economy, which turned down but evaded recession last year, has outperformed its global peers mainly on strong demand from China for its resources and robust domestic consumption.

AXA Asia-Pacific said the performance of all its regional operations, such as Hong Kong, Southeast Asia, Australia and New Zealand had improved.

(US$1=1.1037 Australian Dollar)

(Editing by Mark Bendeich and Muralikumar Anantharaman)

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