3rd UPDATE: AXA SA Plans To Raise EUR2 Billion For Acquisitions

French insurer AXA SA (AXA) Monday signaled its growing confidence in the global economy by asking shareholders for EUR2 billion in extra funds to swell its war chest for potential acquisitions, including a proposed deal to simplify its holdings in Asia.

"We feel it's the right time to be on the offensive ... the right time to reinforce our exposure to emerging markets," Chief Executive Henri de Castries said, noting that the "global macroeconomic situation is improving."

Chief among AXA's acquisition targets is the possible purchase of AXA Asia Pacific Holdings Ltd.'s (AXA.AU) Asian assets, which could eat up about EUR1.1 billion of the fresh funds.

The move would allow AXA to install a leaner management structure in Asia, generate synergies and put its large balance sheet to use in the region, de Castries said.

AXA APH earlier Monday rejected an A$11 billion cash and equity takeover proposal from Australian wealth manager AMP Ltd. (AMP.AU), which had planned to sell the company's Asian businesses to AXA SA.

Under the terms of the complex proposal, AMP aimed to buy all of AXA APH, including the 53.9% held by AXA SA. AMP would then merge AXA APH's New Zealand and Australian wealth management and protection businesses with its own and sell AXA APH's Asian operations to AXA.

The proposal is the parent company AXA's second attempt to snap up AXA APH's Asian assets. It failed with a lowball A$6.9 billion buyout of AXA APH in 2004.

AXA executives said they are still confident the deal may go through, despite the Asian company's thumbs down.

"We believe that we are not too far from something that is more likely than not to happen," Chief Financial Officer Denis Duverne said, adding that AXA has "a little bit of flexibility" to raise its offer, but "not much."

The deal would give AXA "a free hand" in Asia and get it out of a "complicated situation" in Australia, a Paris-based analyst said.

At 1138 GMT, AXA shares were down 1.2%, or EUR0.20, at EUR16.68, underperforming a stronger Stoxx Europe 600 insurance index. The share price decline is due to the unexpected rights issue, the analyst said, adding that he expects the stock to recover.

Another area where AXA said it may seek to employ the extra funds is in the buyout of minority interests in its Central and Eastern European operations held by the European Bank for Reconstruction and Development.

Those minority interests are worth hundreds of millions of euros and are currently the subject of discussions with the EBRD, Duverne said.

The company also wants to "keep some powder dry" for potential deals that may arise in the near future, de Castries said. "We think we will see opportunities in the quarters to come," he added.

A number of insurance activities are slated to be put on sale in coming years, particularly from banks that received state aid and have been told to spin off assets for competition reasons.

Dutch financial services company ING Groep NV (ING) is exploring several options to offload its insurance businesses through initial public offerings or sales.

AXA said it was too early to say if it would bid for anything from ING.

On the other hand, de Castries said the company is not interested in purchasing insurance operations likely to be put on the market by the U.K.'s majority state-owned Royal Bank of Scotland Group PLC (RBS).

The new AXA shares arising from the capital increase are expected to list on Dec. 4, the company said.

Shareholders will be entitled to one preferential subscription right for each existing share held at the end of trading on Nov. 9. Twelve preferential subscription rights will be required to subscribe for one new share at a subscription price of EUR11.90, AXA said.

After taking into account the dilution once the new shares start trading, the price represents a discount of 27.9% to the EUR16.88 AXA shares closed at Friday, according to the group.

AXA's mutual shareholders AXA Assurances IARD Mutuelle and AXA Assurances Vie Mutuelle, which together own 14.29% of the company's capital, have agreed to follow the rights issue, exercising all of their preferential subscription rights, AXA said.

French bank BNP Paribas SA (BNP.FR), which holds 5.36% of AXA shares, and French electrical equipment maker Schneider Electric SA (SU.FR), which owns 0.47%, have also "indicated their intention to subscribe to the capital increase," AXA said.

A syndicate of banks has underwritten the remainder of the share issue, the company said.

-By Jethro Mullen, Dow Jones Newswires; 33 1 4017 1738; jethro.mullen@dowjones.com

(Rebecca Thurlow and Bill Lindsay contributed to this report from Sydney.)

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