ACCC shoots down NAB bid for AXA
Australia's antitrust regulator has shot down National Australia Bank's A$13.3 billion bid for AXA Asia Pacific saying it would lessen competition in the wealth management market.
Tuesday, April 20th 2010, 10:09AM 
4 Comments
by BusinessDesk
At the same time, it said AMP's rival, lower-value proposal wouldn't dampen competition. The Australian Competition and Consumer Commission (ACCC) said its main bone of contention for a NAB merger would be that retail investors would have substantially fewer platforms to access products, something that wouldn't happen under an AMP merger. The ACCC didn't have any competition concerns about superannuation, insurance and banking markets.
"Allowing NAB and AXA to merge would significantly diminish the incentives to compete for retail investment platforms used by investors that have complex financial needs," ACCC chairman Graeme Samuel said in a statement. "At the heart of the ACCC's decisions are concerns about innovation, and as a consequence future rigorous and effective competition between retail investment platforms."
Last December, NAB offered AXA AP investors either A$6.43 per share in cash, or $1.59 and 0.1745 of a NAB share per AXA AP share, trumping AMP's bid at A$6.22 a share. Under both deals, AXA SA, the French parent which owns 54% of the Asia Pacific business, would then buy back AXA AP's Asian business.
AXA AP's shares last traded at A$6.34 on the ASX.
The regulator said AXA was advanced in developing a low cost retail investment platform, and that this would probably improve the wealth management firm's ability to compete in the future. Until the platform was completed, the ACCC said it doubted existing rivals have an incentive to boost innovation in the near future.
Samuel also said there were high barriers to enter the wealth management sector. "Potential entrants need significant scale and established relationships with financial advisers to justify the initial and ongoing investments to enter with a platform," he said.
NAB said it was considering the decision before it will make any comment, while AMP welcomed the review. NAB has six weeks to persuade the regulator to change its mind before AXA AP, AXA SA or the bank can terminate the proposal after agreeing to "binding terms" last month.
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NAB now have 6 weeks to come back to the ACCC and see if they can do a "deal". My pick is that they will provide an undertaking to the ACCC about divesting a part of their Wrap business and the deal will then go thru. The real issue is if NAB are serious about chasing this, what part of the combined business will they divest to close the deal. Time will tell!
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Result = Competition in the Risk Insurance industry would be dealt a huge blow. Come on ACCC - you need to think this thing through a lot more clearly.