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Competition Regulator Rejects NABs Proposed Acquisition Of AXA Asia Pacific Holdings
The Australian Competition and Consumer (ACCC) has given its final verdict on the proposed acquisition of AXA Asia Pacific Holdings (APH) by NAB, delivering what can only be described as a death blow to the proposed $13.3 billion bid, by saying it remains opposed to any deal.
The failure to give its blessing stalls NAB’s plan to become the clear dominant player in the Australian wealth management space, and further complicates APH’s parent AXA SA ambition to expand substantially in Asia.
The regulator stood by its earlier decision on April 19th when it rejected what would have been the second largest deal in Australian financial services history.
The completion watchdog argued that the acquisition would curtail competition in the market for supply of retail investment platforms, internet portals that link retail investors with the wide range of investment products that fund management companies provide.
Peter Kell, deputy chairman of the commission said that the proposed concessions by NAB and APH to divest the target company’s North investment platform to a smaller wealth manager, IOOF, “do not provide sufficient certainty that the ACCC’s competition concerns will be addressed”.
The regulators reasoning was that IOOF lacked the infrastructure required to make the investment platform a competitive force to be reckoned with in its own right.
The ACCC added that because both the acquirer and target company’s had failed to agree to include their combined distribution network of financial planners, or sell products supported by the North platform to IOOF, there was “considerable uncertainty” that IOOF could become an effective competitor to the combined NAB-AXA.
“The undertakings as proposed place a heavy reliance upon IOOF having sufficient distribution capability to provide an effective competitive constraint upon existing key players in the foreseeable future,” said Mr Kell.
APH’s stock price fell sharply as trading opened, falling by as much as 8.6 per cent by early afternoon trading, with Goldman Sachs saying that NAB was likely to call it a day with its bid.
“In our view, the most likely option is for NAB to walk away and pursue an organic acquisition strategy of advisers rather than a large acquisition,” Goldman Sachs analyst Ben Koo said in an early note to clients.
Contrastingly NAB stock rallied 3.8 per cent on the news.
Goldman’s Koo said that whilst it was possible that NAB may challenge the decision, or restructure its bid to include the sale of its financial planning network, cosmetic changes to a deal may still not guarantee approval.
“In the near term, fears of a large capital raising will now dissipate for NAB however M&A uncertainty will remain an overhang until NAB clarifies its response to the ACCC decision,” said Mr Koo.
NAB said earlier it is considering the implications of the decision and will update the market “as soon as possible”.
The other interested parties to the deal including rival bidder AMP all said they would evaluate their position before outlining what their next steps would be.
AXA SA, the French parent of APH said through a spokesperson that it was disappointed with the regulators decision, but will review the decision carefully before further commenting.
APH said through a statement that it had taken note of the decision but a spokeswoman wasn’t immediately available for further comment.
Rival bidder AMP for its part welcomed the decision and said it continues to find APH an attractive strategic target, but did not feel compelled or sense any urgency in making any quick moves.
A spokeswoman for AMP said whether the group will seek fresh talks with AXA SA is “a decision for another day”.
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