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AMP proposal for AXA “fair and reasonable”

Monday 17th January 2011

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The independent expert report on AMP's $13.3 billion bid for AXA Asia Pacific Holdings (APH) has concluded that the proposal is fair and reasonable and in the best interests of minority shareholders.

Grant Samuel says “the value to be delivered to AXA Minority shareholders under the Proposal is compelling.

"Simply put, AXA is worth more on a break-up basis than as a standalone single entity."

AXA APH independent directors unanimously recommend that minority shareholders support the proposal in the absence of a superior proposal.

The Grant Samuel report says a public auction for AXA has been underway since December 2009 – ample time for any interested third party to consider its position and submit a higher offer.

It says in the absence of any higher offer, it appears reasonable to conclude that the price to be paid under the proposal is the highest price that can be realised in the current market.

Grant Samuel also looks at disadvantages of the proposal and concludes they are not significant, relating to the medium term prospects of the merged group.

It says under the merged group AXA minority shareholders will have greater exposure to the Australian superannuation sector and Australian asset management than they currently have.

"The merger synergies that AMP has announced may take longer to realise than currently expected, may never be realised or may be more costly to achieve than currently estimated.

“In addition effective management of multiple groups of financial planners will be challenging and there is a risk that the merged business could lose customers, staff and revenue."

AMP chairman Peter Mason says Australians and New Zealanders deserve a strong, local non-bank competitor in the wealth management sector.

"By merging the strengths of both companies, we believe the proposal will establish that competitor and provide enhanced, competitively priced products, services, investment opportunities and financial advice to consumers.

He says as the securitisation markets recover and more funding becomes available, its aim will also be to use the strengths of the merged businesses to help provide consumers with more competition and choice in the banking market.

The shareholder meeting to vote is scheduled for Wednesday, 2 March. If the votes are for the proposal, on March 8, AXA disappears.

Grant Samuel has valued AXA APH in the range A$14,060 - $15,325 million, which corresponds to a value of A$6.03 - $6.64 per share.



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