This column finds itself in the laboratory this morning with controlled test conditions available to assess the commentary rodentia. This experiment models AMP’s bid for Axa APH.
Via Business Day, The Sydney Morning Herald and The Age release two of their business snufflers into the Axa maze. The first is Ian Verrender who takes a strongly local angle, coloured with dialect. The piece is a potted history of AMP and can be summed up in a single sentence from the final paragraph: “Craig Dunn [AMP CEO] has cast the die. Where there were six – the big four with the big two insurers – there now is likely to be just five.” This is typical Verrender – too often populist and simplistic. He has taken an early wrong turn.
The second piece is by Malcolm Maiden, who shuffles past Verrender into fresh corridors and insights including some interesting AMP data. “AMP is therefore valuing the Australian and New Zealand wealth management and insurance operations it wants to keep at $4 billion … For that price it will double its tied planner sales force, increase its access to independent planners seven-fold, boost its risk insurance market share from 9.1 per cent to 17.5 per cent, its share of superannuation assets under management from 5.8 percentage points to 23.6 per cent, and its share of retirement income generating assets by 6.2 percentage points to 17.6 per cent.” Ultimately however, the Maiden mouse grows tired and rests mid-corridor with his contention that “The banks will also look at both AMP and AXA APH, and AMP shares edged up on speculation that Westpac would look hardest.”
Overtaking Maiden, John Durie of The Australian sees this as unlikely: “… given it has taken [bank] boards of directors six months to pull their head out of the sandstorm created by the financial crisis, it would be a brave board indeed to go doubling up in this market ahead of a raft of regulatory changes next year.” Ominously, the muscular and hirsute Durie peers down the corridor and declares that “The battle has just begun, the stockmarket is enjoying the return of takeover deals, but it remains to be seen whether Axa’s Allert can get anywhere close to creating price tension in this deal.”
However, the process of creating that price tension was summed up brilliantly yesterday by Robert Gottliebsen of Business Spectator. The depilated and enigmatic sire of Australian business critters bounds past his juniors with an assessment of the deal process that made this observer’s white coat flap around his ears. “Step one: First you put in a low bid with all sorts of qualifications and nasties. Step two: It is of course rejected by the target board but then all the hedge funds and punters plough in and buy the stock discovering the level at which institutional shareholders will sell. Step three: The hedge funds use their mates in the print press to attack the defending board. All sorts of scoops are arranged. Step four: Then the bid is lifted to a level that gives the hedge funds a profit and all the nasty qualifications are removed. The press warns shareholders that the price will drop if the bidders withdraw because all the hedge funds and other speculators will sell their stock. Step five: The board gives in.”
And right on cue, The Australian’s second mouse into the maze is Matthew Stevens. Without so much as a baulk, a murine Stevens goes for the cheese and hurtles straight into the trap. According to Stevens, “The chairman of Axa Asia-Pacific Holdings had been warned early on Friday that an offer was probably heading his company’s way … Midnight came and went and Allert finally retired without confirmation of an offer but still anticipated a long, difficult weekend … He woke at 6am on Saturday morning to the offer (it lobbed finally at 3am).” Stevens seems to be signalling that he has talked to Allert. But if so, why not say so? The problem with zig-zagging around the source is that as his story develops a positive tone, this column can’t help wondering whose analysis is being offered: “That $1.3bn or so more than consensus underlines an Axa APH Asian success story that has been more than 20 years in the making. It is making very good money in Hong Kong, starting to in South-East Asia and is still in the capital-intensive build-up stage in China and India…” Is Stevens having his coat stroked and being used?
Two other commentators pursue less flashy but more trustworthy routes. Stephen Bartholomeusz of Business Spectator and Bryan Frith of The Australian bar entry to the labyrinth and instead provide analysis of the test itself. Bartholomeusz looks into the ‘phoney war’ created by the “scheme of arrangement” around the Axa and Transurban bids. Bartholomeusz concludes that “It is unlikely either will mount a conventional hostile offer because the pension funds need 100 per cent of Transurban to take it out of the listed environment and AMP and AXA SA need AMP to achieve 100 per cent of AXA APH before they can carve it up and enable AMP to access the synergies … That gives the target boards considerable negotiating leverage”. Frith, on the other hand, suggests “At issue is whether AMP should have been required to disclose yesterday the full details of a “consortium deed” and an “exclusivity arrangement”, which the two companies have entered into, to ensure an informed market.” Both pieces are worth reading.
Finally, bringing up the rear, with no shame nor great pace either, is The Australian Financial Review’s Alan Jury, writing as Chanticleer, with his conclusion that “the game’s afoot and, as seems to happen more and more these days, no one has actually said anything other than “‘the price isn’t right’”.
The test results are as follows: Gottliebsen 90 per cent, Bartholomeusz 85 per cent, Frith 80 per cent, Durie 75 per cent, Maiden & Jury 70 per cent, Verrender 60 per cent, Stevens fail.
Elsewhere today: the AFR editorial weighs in against the CPRS and in favour of nuclear power; in AFR op-eds, Tony Harris looks at the challenge facing Barry O’Farrell in reforming NSW politicised public service; and Alan Anderson argues for liberalisation of local government planning. Michael Stutchbury of The Australian quotes David Hale and his contention that a strong US recovery will cause major pain to Australia through high interest rates.
David Llewellyn-Smith is the co-founder and former publisher of The Diplomat magazine. He runs a media business and communications consultancy in Melbourne and co-authored The Great Crash Of 2008 with Ross Garnaut.
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