Market awaits next move in AXA battle

With National Australia Bank (NAB) now in the box seat to acquire the assets of AXA Asia Pacific, ANZ is keeping tight-lipped on whether it will make a tilt for a wealth management business.

Chief executive Mike Smith says ANZ's priority is to bed down its A$1.76 billion ($2.19 billion) acquisition of 51 per cent in ING Australia.

His comments were made in response to a question about how ANZ would respond to NAB's A$13.29 billion proposed acquisition of AXA Asia Pacific Holdings.

"Quite clearly we have a strategy to grow our wealth management but we have to bed down our ING acquisition first, Smith said after ANZ's annual meeting on Friday.

Market speculation has focused on which major wealth manager would be the next takeover target since NAB trumped AMP's revised bid of A$12.85 billion for AXA Asia Pacific.

"I'm not going to comment about AMP," Smith said. "All I'm telling you is that wealth management is an important part of our business."

The merger of AMP and AXA would have seen a major shakeup of the New Zealand wealth management sector.

Including wholesale and institutional funds under management, AMP's New Zealand investment operation has around $11 billion under management while AXA NZ has about $7 billion under management. A combination of the two would easily outstrip the NZ Superannuation or "Cullen" fund, which has about $13.3 billion under management.

However if BNZ takes over management of AXA's business there would be less upheaval. BNZ sold out of the wealth management business in 2005.

While the NAB is heavily favoured to take out the deal some are picking AMP will counter with another bid.

Local brokerage Craigs Investment Partners has raised its price target for AXA Asia believing AMP will counter with a higher offer now that NAB had shown its hand. Craigs calculated that AMP could pay up to A$6.60 a share and still make the transaction earnings per share neutral in 2011.

ANZ is the most likely buyer of AMP because it has the strongest capital among Australia's biggest lenders, meaning it would have to raise the least money to finance an offer, said Brett Le Mesurier, head analyst at Axiome Equities.

It also has the weakest wealth-management business, he said.

"Buying ING indicated that there's more to come," said Le Mesurier. "The only question is: what is the next step?"

Commonwealth Bank of Australia - parent company of ASB in New Zealand - may also be a contender for AMP, according to Le Mesurier.

"They don't look like they're interested in playing this game, but I wouldn't go so far as to rule them out."

Steve Batten, a spokesman for Commonwealth Bank, declined to comment. Commonwealth Bank owns Colonial First State wealth management, Australia's largest asset manager.

Westpac, Australia's second-largest bank, was focused on running its retail division and integrating St George Bank, which it bought in 2008, Le Mesurier said. There are no obvious overseas bidders for AMP, says the analyst. Jane Counsel, a spokeswoman for Westpac, declined to comment.

AMP isn't the only potential target.

Investment manager Challenger Financial Services Group, and Perpetual, the Australian fund manager that has posted two years of falling profit, may also be approached, the Australian Financial Review has reported.

WEALTH MANAGEMENT SHAKE-UP

* An initial bid by AMP for AXA Asia Pacific would have created New Zealand's largest fund management company.

* AMP has been trumped by National Australia Bank, the parent company of the BNZ. NAB's bid is worth $16.6 billion.

* The market is now speculating about the prospects the other three big retail banks may make takeover plays for wealth management companies.