Nobody should be terribly surprised that AMP Limited last week turned suddenly coy in its desire to acquire AXA Asia Pacific (AXA AP). It was all part of a renewed corporate mating ritual.
It is now almost a year since AMP Limited entered into discussions with AXA AP’s French parent as part of its original bid, only to have those initial blandishments rejected by AXA’s local board and then gazumped by a more generous suitor in National Australia Bank (NAB).
With the Australian Competition and Consumer Commission (ACCC) ruling against NAB’s case, AMP Limited finds itself as the only eligible suitor with the result that the dynamics of the mating ritual have changed.
Thus, when AMP Limited last week issued an investor briefing to the Australian Securities Exchange (ASX) it talked a lot about the prospects for “organic growth” while suggesting that there was scope for “inorganic growth” but only in the “right circumstances”.
For the uninitiated, “inorganic growth” is corporate jargon for mergers and acquisitions and everyone knows that the only significant merger and acquisition strategy on AMP’s agenda this year has been AXA AP.
While the ACCC based its veto of the NAB acquisition of AXA AP on its concerns around NAB/MLC’s dominance of the platforms market, it appeared to give the green light to the AMP Limited acquisition in circumstances where AMP does not have a platform presence.
However, a question posed by some industry pundits is whether the ACCC should be quite so sanguine about AMP acquiring AXA AP when the make-up of the financial planning industry and retail superannuation sector is taken into account.
This is because where it might be argued that Westpac, NAB/MLC and the Commonwealth/Colonial dominate the investment platform space, a combined AMP/AXA AP would represent a significant force in the superannuation and financial advisory space.
This much is made clear in the information released by AMP to the ASX last week where its data suggested that a combined AMP/AXA would account for 23 per cent of retail superannuation compared to 21 per cent for NAB/Aviva, 13 per cent for the Commonwealth Bank/Colonial and 10 per cent for Westpac/St George.
Where financial planning is concerned, the AMP analysis is equally compelling suggesting that a combined AMP/AXA would account for 17 per cent of the market, compared to 10 per cent for NAB/MLC/Aviva, 12 per cent for ANZ/ING, and 7 per cent for Commonwealth/Colonial.
In all likelihood the ACCC will not be greatly moved by this data in circumstances where it regards AMP as a non-bank player and where the combined market share of the banks is significant and where it can be argued that adequate competitive pressures will remain.
However, what the AMP analysis also reveals is the degree to which the ANZ remains the smallest bank player in the wealth management and superannuation space and the degree to which IOOF will need to continue to develop scale in a planning, platforms and superannuation environment dominated by the big banks and AMP.
In circumstances where the ACCC’s decision to veto NAB’s bid for AXA AP means the rules of the mating ritual have changed, it is probably wise to look at the statements issued by AMP’s senior executives when they felt their company had been cuckolded.
Back in April, AMP chief executive, Craig Dunn, welcomed the earlier positive findings of the ACCC to the AMP bid.
“After a thorough and detailed review of the complex competition issues involved in the two proposals put before it, the ACCC has determined that competition would be best served by AMP’s proposal,” Dunn said.
“A merger of AMP and AXA AP’s Australian and NZ operations would see the creation of a fifth pillar in the critically important financial services sector,” he said.
“We have always believed that a combined AMP-AXA AP group would provide an even stronger, non-bank competitor in financial services that Australian consumers deserve,” Dunn said.
“AMP continues to believe it can put forward a proposal that is financially disciplined and will create value for its shareholders, and which the independent directors of AXA AP will be able to recommend to their minority shareholders,” he said.
The dance continues but the music must soon come to an end.