Australia’s No.2 wealth manager AMP Ltd signaled on Thursday that it had room to improve its $11.6 billion bid for AXA Asia Pacific, but said it had yet to decide on its next move.
AMP is in a bid battle with the country’s top lender, National Australia Bank, for AXA Asia Pacific, which offers one of the few major consolidation opportunities left in Australian financial services.
AMP Chief Executive Craig Dunn, delivering the company’s annual results, said AXA Asia Pacific remained a strategically attractive target despite AMP being trumped by NAB’s $12 billion offer.
“The comments sounds as though AMP is contemplating an amended offer,” Angus Gluskie, a portfolio manager at White Funds Management. “It means they will look at whether they can fix it successfully.”
Dunn hinted AMP’s wording of ‘best and final offer’ for AXA Asia Pacific may no longer be an obstacle. “The more the circumstances continue to change, the more the time moves on, the more flexibility we have on the bid,” Dunn told a results briefing, declining to be drawn any further.
His comment on “changing circumstances” referred to AXA Asia-Pacific’s recent strong profit results. On Wednesday, AXA Asia-Pacific reported its best annual results in six years and promised strong growth in 2010. [See IJ web site – https://www.insurancejournal.com/news/international/2010/02/17/107410.htm].
AXA Asia Pacific has already rejected AMP’s offer, but Australia’s competition regulator recently tipped the scales back in AMP’s favor after raising more concerns about NAB’s bid than with the AMP offer. NAB is already Australia’s largest wealth manager.
The competition watchdog, which has yet to make a ruling, is not the only hurdle for the two rival bidders: AXA Asia Pacific’s parent, AXA SA, which majority owns the Australia-listed business, will also have a casting vote.
Under both the AMP and NAB proposals, AXA SA would retain the Australian subsidiary’s Asian operations. The French insurance giant has yet to reveal its position on the two proposals.
Dunn latched on to the competition watchdog’s view that it would be better for Australia to have a strong wealth manager in a merged AMP-AXA to compete against the country’s four big banks. “Australia will be better off if we have a fifth pillar, which is a non-bank,” he told reporters.
AMP reported 27 percent net profit growth for 2009, bolstered by a jump in investment returns as markets recovered last year. Underlying profit slipped in line with analysts’ forecasts.
The company warned that investment markets may remain volatile as the outlook for the global economy was still uncertain, and said it preferred to hold capital as investor confidence remained shaky.
“We will continue to actively manage our capital base to ensure our balance sheet strength provides the flexibility to grow the business and withstand volatile investment markets,” Dunn said.
(Reporting by Sonali Paul and Narayanan Somasundaram; Editing by Mark Bendeich and Jeremy Laurence)
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