AXA in rights issue but Asian bid is snubbed

Independent directors at Asian unit show resistance to break-up plans
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The Independent Online

AXA yesterday launched a €2bn (£1.8bn) rights issue to fund an expansion drive in Asia, but suffered a setback as independent directors of its own Asian business snubbed the company's takeover plans.

The acquisitive French insurer had wanted to take out minority interests and break up AXA Asia Pacific with the help of the Australian insurer AMP. The rights issue was intended to part fund the cash component of the proposed deal.

But the AXA AP's independent directors rejected the A$11bn (£6bn) proposal the two had tabled, saying it "fundamentally undervalues the business".

Nonetheless, the rights issue suggests renewed confidence at AXA, which grew from a provincial French player into a global giant through a string of deals executed first by Claude Bebear and more recently his successor, Henri de Castries.

Yesterday, on the subject of the rights issue, he said: "We feel it's the right time to be on the offensive ... the right time to reinforce our exposure to emerging markets." Mr de Castries also said the company felt that the "global macroeconomic situation is improving". Insurers have suffered far less than banks during the recent

However, to win control of AXA Asia Pacific it faces a battle. The complex deal put together with AMP would have seen the latter buying the entire operation for cash and shares at A$5.34, a premium of 31 per cent at Friday's close on the Sydney Stock Exchange. AMP would then sell the Asian assets onto Axa in return for Axa's 54 per cent stake in the Australasian assets and A$1.8bn in cash.

It is the second time AXA has tried to take out the Asian operations, which would allow it to streamline the management of the unit and use it as a vehicle for the company's ambitions in the fast-growing Asia Pacific region. The first bid in 2004 was similarly rejected but AXA, while saying there was only "a little headroom" to raise the offer, maintained that it was confident a deal could be done.

Rick Allert, AXA Asia Pacific chairman, said: "The proposal has been received against the backdrop of recent weakness in global financial markets and before the growth of our Asian operations is fully reflected in our profitability." Another potential fly in the ointment could yet come from Australian competition authorities, which have said they will look at the Australia part of the deal.

AXA's rights issue will see it offering new shares at €11.90, almost a third less than last Friday's closing price of €16.88.

Mr de Castries said of the cash call: "Through the rights issue, our shareholders will be able to participate in the positive prospects offered by the acquisition opportunities arising from the current market environment."

Axa has been cutting costs in an attempt to streamline its sprawling global operations.