National Australia Bank Ltd. (NAB.AU) on Tuesday walked away from its A$13.3 billion agreement to take over AXA Asia Pacific Holdings Ltd. (AXA.AU) after the Australian competition regulator last week said it would block the deal on competition concerns for a second time.

NAB's move to terminate its deal with AXA SA (CS.FR) over the ambitious bid potentially paves the way for AMP Ltd. (AMP.AU) to renew its bid for AXA Asia Pacific. But analysts expect AMP will not be in a rush to do a deal.

Terminating the deal will also allow AXA SA to start considering other options as it seeks to buy out AXA Asia Pacific's Asian operations. It had agreed to buy the Asian operations from NAB under NAB's buyout plan, after striking a similar deal with AMP last year before AMP's bid was trumped by NAB.

The Australian Competition and Consumer Commission last week maintained its April 19 rejection of what would have been the biggest deal in Australia's financial services history, arguing it would crimp competition in the market for supply of retail investment platforms--internet portals that link retail investors with the wide range of investment products that fund management companies provide.

"Although we are disappointed with the decision of the ACCC, we have a strong position through MLC and NAB's other wealth management businesses," National Australia Bank chief executive, Cameron Clyne, said in a statement.

"NAB remains very committed to participating in the wealth management industry which is an important part of the bank's future. However, considering all the options, continuing with this agreement is not in the best interests of shareholders," Clyne said.

AXA Asia Pacific Chairman Rick Allert in a statement noted NAB's decision to withdraw its proposal.

"The directors remain very confident about the future and we look forward to continuing to deliver shareholder value," Allert said.

Paris-based AXA SA, which holds a 55% stake in AXA APH, said last week that it was reviewing its Asian strategy after the decision, but Australian analysts expect it will remain very keen to get its hands on the Asian operations as it looks for new growth avenues. AXA SA wasn't immediately available for comment.

Analysts said last week the French parent is likely to look at a range of options, which could include increasing how much it will pay for AXA Asia Pacific's Asian operations, thus allowing AMP to bid more. Under the deal with NAB, AXA SA had agreed to pay around A$9.4 billion for AXA Asia Pacific's Asian businesses.

A spokeswoman for AMP said that it continues to view AXA Asia Pacific's Australian and New Zealand operations as "strategically attractive" on the right terms, and it is considering its options.

Buying AXA Asia Pacific would consolidate AMP's position as the second-biggest wealth manager in Australia and New Zealand, behind Commonwealth Bank of Australia. And unlike NAB, AMP already has the blessing of the ACCC to strike a deal after first bidding for the group late last year.

AMP first bid for AXA Asia Pacific with the backing of AXA SA in November, offering of 0.6896 AMP shares and A$1.92 cash for each AXA Asia Pacific share before its offer was trumped by National Australia Bank. NAB was offering either A$6.43 cash or 0.1745 NAB shares and A$1.59 for each AXA Asia Pacific share, winning board support and prompting AXA SA to switch its backing to NAB.

AMP is unlikely to raise its November offer to match NAB's offer price, which could make it difficult for AXA Asia Pacific's board to recommend.

AXA Asia Pacific shares closed down 4 Australian cents at A$5.18.

As for NAB, analysts expect it's unlikely to target any further large acquisitions in the wealth management space, given the perception that the ACCC does not want to see further consolidation involving the big banks.

"We think other M&A opportunities for NAB are limited and a back-to-basics domestic banking strategy will likely ensue," RBS analysts said last week after the ACCC said it would block the deal. "NAB's strategy in wealth management should by no means be changed by missing out on the AXA assets," RBS said.

-By Lyndal McFarland, Dow Jones Newswires; 61-3-9292-2093; lyndal.mcfarland@dowjones.com
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