AXA Asia-Pacific Returns to Profit; No Comments on Takeover Bids

February 17, 2010

Takeover target AXA Asia-Pacific’s promise of strong growth in 2010 prompted analysts to suggest suitors may consider raising their bids for the firm but top officials declined comment on the $12 billion tussle.

Insurer AXA Asia-Pacific, which is being circled by National Australia Bank and AMP, posted its biggest annual profit since 2003 and saw its Asian operations powering ahead while Australian business recovered.

“The result is stronger than previous consensus expectations and as such could have either AMP or NAB validate a slightly higher bid,” Arjan Van Veen an analyst at Credit Suisse said.

Both AMP, which reports earnings on Thursday and NAB, which announces its quarterly update on Friday, could reveal their next moves then.

On top of the price they are willing to offer, the rival suitors have to gain regulatory clearance in the takeover fight for the Australian unit of Europe’s second-biggest insurer AXA. Earlier this month the Australian Competition and Consumer Commission said it hoped to announce its decision on the two bids by March 17.

AXA Asia-Pacific Chief Executive Andrew Penn declined comment on the takeover tussle but spoke about growth prospects after the company navigated out of the global financial crisis. He said the Australian business, which saw operating earnings fall by a quarter to A$176 million [US$159 million] as funds under management fell, was back in a position to grow.

“The underlying characteristics are very attractive. And as we come out of the most difficult times, the market and we are in a strong position to grow.”

The Australian business would be of particular interest to NAB and AMP. Under their respective offers both companies plan to buy all of AXA Asia Pacific, keep the Australian and New Zealand businesses, and sell divisions in eight Asian nations back to AXA SA.

The ACCC has said it was more concerned about NAB’s bid, which is higher than AMP’s and has AXA Asia Pacific independent directors’ endorsement.

“It is now in the hand of the competition regulator not AXA to chose the suitor,” said Tom Elliot, Managing Director at fund manager MM&E Capital. “Both will want it and the numbers illustrate why they want it.”

AXA Asia Pacific reported a net profit of A$679 million (US$613.4 million) in line with the company’s and analysts’ expectations, helped by a revival in business in the second half and a strong showing by the resilient Asian business. It had posted a loss of A$279 million [US$252 million] a year ago.

Hong Kong saw a 15 percent growth in operating earnings gaining from favorable forex movements and while AXA’s Southeast Asian operations posted a 44 percent surge in operating earnings.

In January, the company said it expected 2009 profit after tax and non-recurring items would be A$675 million [US$610 million].

Shares in AXA Asia Pacific, were up 1.1 percent in a strong Australian market. The shares risen 44 percent since end September, boosted largely by the takeover tussle, compared to a 3.7 percent fall for the benchmark.

($1=1.10686 Australian Dollar)

(Reporting by Narayanan Somasundaram; Editing by Jeremy Laurence and Valerie Lee)

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