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.
The deal would also cut Axa's exposure to the competitive
Australian market by selling off assets there as part of the
complicated transaction.
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.
The rejection was made by an independent board committee, which
said that the proposal was "inadequate and is not in the best
interests of AXA APH’s minority shareholders."
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 A$6.9 billion buyout of
AXA APH in 2004.
AXA executives said they are still confident the deal may go
through, despite the independent board'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.
"This move is good, in our view, for AXA as it lets the group
withdraw from the very competitive Australian market, in order to
focus on an area of growth [Asia]," Cheuvreux said. "Through this
transaction, AXA will also control 100% of its future development
in Asia."
AXA shares closed up EUR0.07, or 0.4%, at EUR16.95.
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 isn't 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 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.
- Jethro Mullen, Dow Jones Newswires; 33 1 4017 1738;
jethro.mullen@dowjones.com
(Ambroise Ecorcheville in Paris and Rebecca Thurlow and Bill
Lindsay in Sydney contributed to this article.)
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