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AMP, AXA: Big four's 'fifth pillar' fright
JAMIE FREED
November 11, 2009 - 2:10PM

There has been plenty of speculation in the market that AMPs joint bid for AXA Asia-Pacific could prove a catalyst for one of the big four banks to launch a takeover bid for AMP to prevent the deal from happening.

The thinking is that the combined local operations of AMP/AXA Asia-Pacific will form a fifth pillar too big for the banks to buy due to competition concerns.

However, Goldman Sachs JBWere thinks there is unlikely to be an immediate bid for AMP by any of the big four. It points out that the banks would almost certainly dilute their earnings per share and return on equity by a few per cent by purchasing AMP and they would need to be willing to take on the regulatory risk AMP is facing in the near term.

But the more interesting point is that the window for the banks to act may not be as small as it looks, because the complex scheme of arrangement proposed by AMP and AXA SA to acquire AXA Asia-Pacific could take six months to implement even if it is approved by the board of AXAs local arm.

Goldman Sachs JBWere thinks the banks would prefer to have the luxury of seeing how the regulatory review plays out and the ability to keep their powder dry in case AMPs bid for AXA Asia-Pacific fell over, which would leave it more exposed than ever.

Finally, the broker noted the talk of a takeover bid for AMP by one of the big four is perversely increasing the value of its scrip bid for AXA Asia-Pacific, making it more likely that deal could proceed.

Another possible outcome could be a Big Four bank bidding for AXA Asia-Pacifics Australasian arm in concert with AXA SA.

An exclusivity agreement between AMP and AXA SA released to the market yesterday showed AXA SA could give one months notice after February 6 to end the partnership if it received an unsolicited approach from a third party with a better offer for a joint bid.

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