Markets await fresh AXA Asia Pacific bid from AMP

After twice being rebuffed by the AXA Asia Pacific board, investors are wondering if AMP is in a position to structure a deal that will win over its long-time rival.

A swing factor remains France's AXA SA, AXA Asia Pacific's parent company, which has been attempting to drive the break-up of its Australian offshoot as it attempts to gain control of the faster-growing Asian businesses.

To secure an outcome, AXA SA needs to sweeten the $9.4 billion it expects to pay for the Asian operations to help top up AMP's offer, analysts said.

AXA Asia Pacific shares closed steady yesterday at $5.13. National Australia Bank, which this week shelved its bid for AXA Asia Pacific due to competition issues, saw its shares rise 2.9 per cent to $25.94.

The sticking point for AXA SA's board could be that AMP has previously indicated it does not see a full cash offer as being in the best interests of shareholders. Last year AMP tabled a revised offer of 0.6896 of its shares plus $1.92 in cash.

Based on AMP's closing price of $5.14 yesterday, this implies an offer of $5.46 for each AXA Asia Pacific share. This would be hard for the target's board to accept given it sits below the sum-of-the-parts valuation for the wealth manager. This offer also falls well short of NAB's cash offer of $6.43 a share.

The Goldman Sachs analyst, Ryan Fisher, believes AMP could afford to bump its existing offer up to around $5.70 a share. RBS, however, argues that AMP could pay up to $6.40 a share, although at these levels the deal wouldn't start paying its way until the second year.

The RBS analyst, Richard Coles, sees an AMP bid of $6 to $6.20 as more likely, but cautions there is no guarantee this will be sufficient to win over the AXA Asia Pacific board.

For AMP, the move is seen as largely a defensive play, given it would build the company up as the fifth pillar in the nation's financial landscape and protect it from possible acquisition from a bank.

Any transaction would result in AMP substantially boosting scale in superannuation, life insurance and retirement income. It would also be able to extract cost efficiencies.