NAB better off without AXA

The Australian Competition and Consumer Commission late yesterday managed to publish a media release, but not detailed reasons, for its decision to oppose National Australia Bank's proposed takeover of the Australian and New Zealand businesses of AXA Asia Pacific.

The ACCC said it did not oppose the alternative bid from AMP, and one lodged some weeks earlier than that from NAB.

Not that the board of AXA AP supported the lower bid from AMP.

And nor, now, are the independent directors of AXA supporting the offer from NAB, given that their support was conditional on ACCC endorsement.

The ACCC's final view was well flagged in the statement of issues published by the competition regulator in the second week of February. (Not that this inhibited numerous predictions that NAB's bid would clear the ACCC, perhaps with the sop of selling the least profitable of the combined group's investment platforms.)

As foreshadowed by the ACCC, it was a merged NAB and AXA's dominant position as supplier of investment platforms that skewered the bid.

"At the heart of the ACCC's decisions are concerns about innovation, and as a consequence future rigorous and effective competition between retail investment platforms," the ACCC wrote in the 14-paragraph announcement published at its website.

The ACCC said it reviewed competition effects in superannuation, insurance and banking, and "did not identify any competition concerns with respect to these markets."

The regulator said that "the key focus, however, was retail investment platforms which provide a central hub for investors to access a range of investment products, and allow for consolidation of client information and reporting on these assets.

"The ACCC found that a merger between NAB and AXA would result in a substantial lessening of competition in the market for retail investment platforms for investors with complex investment needs."

AXA's recent investment in its own platform business appears to be the chief reason for the ACCC knocking back NAB's bid.

The ACCC wrote in its announcement that "AXA is on the cusp of delivering an innovative platform that is likely to provide aggressive competition for investors with complex investment requirements."

This platform, unlike anything else in the market, AXA (or maybe AMP) has persuaded the ACCC would be "low cost" and "full function", though whether either turns out to be true or whether there's a commercial opportunity for AXA in a notoriously inefficient industry segment with such a proposition is another matter.

In any event the ACCC wrote that it "considered that a merger of NAB and AXA would remove competitive tension."

One shift in the ACCC's thinking from February is that AMP's offer would not have this effect. There were suggestions in the statement of issues that AMP may also be in a position to reduce fees paid to third party providers of investment products seeking inclusion on investment platforms, even though AMP lacks a comprehensive investment platform of its own.

By contrast, the ACCC found that AMP was not a significant competitor for retail investment platforms for investors with complex investment needs.

The back story to this decision is, of course, the ACCC's angst over being persuaded by APRA and RBA in late 2008 that it had no choice but to clear the Commonwealth Bank takeover of BankWest, as the latter's owner, HBOS, crumbled at the height of the GFC. There may also be second thoughts over the merit of clearing the Westpac takeover of St George, though the credit shock was then still in its early phase.

The Australian, through columnist Matthew Stevens, and the Herald Sun report that NAB was last night leaning strongly toward appealing the ACCC ruling. The Australian reported that NAB's thinking at this stage is to lodge the appeal directly with the Federal Court rather than the Administrative Appeals Tribunal.

While this is always an option in respect of ACCC decisions, appeals in respect of blocks to high-end takeovers are unusual. Were NAB to take this step, it is also bound to be overtaken by later commercial developments.