Friday, April 1, 2011

AMP acquires AXA


CEO believes hard work is ahead in takeover.
CRAIG Dunn walked into the spacious foyer of AXA Asia Pacific's headquarters in Melbourne's Docklands yesterday as chief executive of AMP and, for the first time, head of the rival company he had spent more than a year and a half pursuing.
Dunn's arrival was remarkable given that AMP came within a whisker of being financially outgunned by National Australia Bank in the bidding war for AXA Asia Pacific.
But the political and regulatory mood eventually swung away from NAB and towards AMP, allowing the $14.6 billion deal to proceed.

Still, Dunn acknowledges that more than once he faced the real prospect of AXA slipping out of his hands.
''It was a long, drawn-out process and some days you felt more confident than others,'' he told BusinessDay. ''It was always a possibility that we wouldn't be successful, but we were determined to see it through right to the end.''
AMP's board met yesterday in the AXA Asia Pacific headquarters, signalling it was now in charge of the wealth manager. It was also the first meeting for former AXA chairman Rick Allert and fellow director Patricia Akopiantz, who have been invited to join the AMP board.
With AXA's shares cancelled from the stock exchange and its shareholders issued with AMP scrip, AXA Asia Pacific is now a wholly owned entity of AMP.
Dunn, a 47-year old former management consultant, has history against him when it comes to bringing together two large wealth managers with entrenched cultural differences.
''The really hard work starts from now. I don't think we're under any illusions that it's not going to have its challenges,'' he said.
One of these will be keeping financial planners, the key revenue drivers of the business, onside.
AXA-aligned financial planners have already warned of deep culture clashes. This is expected to see AMP tread lightly when it comes to any changes in AXA's aligned distribution channels. This represents the single-biggest erosion of value from the merger.
Dunn acknowledges there will be some attrition of advisers and this has been factored into the acquisition price. But he declined to say what would be acceptable loss versus damaging loss.
While AMP and AXA, which evolved out of National Mutual, were fierce competitors - particularly during the 1980s as retirement savings markets opened up - Dunn argues that the myth about the rivalry has been overdone.
''The more people I meet within AXA, the more I think there's a lot of commonality,'' he said.
Dunn is not shying away from job cuts as the two businesses are melded, but said it was too early to put a number on this.
''We've tried to make as few decisions as we can until we get together, until we benefit from the talent and expertise from both businesses,'' he said.
''There are going to be roles impacted and there are going to be unfortunate consequences of merger, but we've still got to work through that process and we haven't made any decisions.''
With the focus on AXA's 1600 staff in Melbourne, where the company has had its headquarters, Dunn points out one of the benefits of the merger is that AMP is going to have a ''much more significant presence'' in the city. Many national roles will also be based in Melbourne, he said.
''It's important that the merger really does bring the strengths of the businesses together, including the talent of both organisations and the planner and advice force of both organisations,'' he said.
AMP has for years been under pressure from investors to show how it is going to regain its dominance in key markets. The big banks have steadily overtaken AMP by using acquisition to beef up their wealth-management businesses.
Now AMP is again the biggest player in retail superannuation, retirement income products and managed funds. It now also dominates the life insurance market.
Under the deal, AXA shareholders will receive the equivalent of $6.43 a share in a combination of cash and scrip.
This will see AMP's shareholder base increased by more than 200,000 to stand at 980,000 investors.
Dunn expects the merger to take about two years to complete.
The second leg of the acquisition, the sale of AXA's Asian businesses to France's AXA SA, will take place tomorrow, marking the end of Australia's most ambitious adventures to date into Asian wealth markets.