Out in the bush

AXA/AMP/NAB: AXA Asia-Pacific has chosen a A$13.3 billion ($12 billion) bird in the bush — over a similar-sized bird in the hand. If the deal goes through, minority investors in the Australasian wealth management group will thank their board. But it is a big if.

The birds in question are rival bids for AXA AP’s minority shares. The first offer is from AXA SA, the French insurer which already owns 54 per cent of the group. It has teamed up with Australian financial services group AMP and is offering A$12 billion to buy out the minorities. Then they would break up the group.

But on 17 December, National Australia Bank launched a cheeky counterbid. Both offers are pitched roughly 50 per cent above AXA AP’s share price before bid interest emerged.

NAB’s offer is a smidgen higher and contains all an all-cash alternative. By contrast, the offer from AXA SA and AMP is a mix of cash and shares. But the NAB bid hinges on a key condition — AXA SA switching allegiance and agreeing to do the break-up with NAB instead.

Where does this leave AXA AP’s minorities? In valuation terms, there’s little in it. NAB’s offer is worth nearly 4 per cent more. But it is also more risky. The snag is that AXA SA cannot switch sides to form a partnership with NAB until February, unless AMP permits it to, due to an existing exclusivity agreement. If markets tank between now and then — say, if there is another shock like Dubai — then AXA SA may get cold feet. For the time being, NAB is offering identical terms for the break-up to those that AXA SA agreed with AMP.

AXA AP’s directors were swung by the possibility of an all-cash offer from NAB. Yet certainty of delivery is worth something too. On that score, NAB’s conditional proposal falls down. AXA AP’s directors, faced with a thorny dilemma, have stuck their necks out. They should hope the risk is worth it since shareholders could end up with nothing.