The competition watchdog has blocked Australia's second-biggest financial services takeover, paving the way for AMP to launch a fresh rival bid for AXA Asia Pacific Holdings.
Analysts say the Australian Competition and Consumer Commission's decision to block National Australia Bank's $13.3billion bid for AXA APH means the big four banks will now be forced to look offshore for acquisitions.
The commission rejected NAB's revised bid yesterday, saying undertakings given by NAB and AXA APH weren't enough to appease the competition concerns it laid out when it first blocked the deal on April 19.
The decision came after the regulator reviewed submissions from market participants over whether NAB's undertaking to sell AXA APH's North wealth.net platform to IOOF Holdings would provide enough competition with a combined NAB-AXA APH wealth management business.
Four commission members made the decision based on the state of the highly concentrated market for retail platforms for investors with complex investment needs.
The market is currently dominated by NAB, Westpac and Macquarie Group.
An NAB takeover of AXA APH would result in the combined entity controlling between 29 and 37 per cent of Australia's funds under management, and between 17 and 21 per cent of annual fund inflows, the commission said in a 36-page public competition assessment.
The commission's deputy chairman, Peter Kell, said the rapidly growing market currently had between $150 billion and $190 billion in funds.
''For the ACCC and for the parties involved there is a lot at stake,'' he said. ''It's a very important market, a critical market, for the Australian community in terms of its savings and investment.
''The ACCC's view was that AXA is emerging as a significant and vigorous competitor and that taking them out of the market was going to see a substantial lessening of competition.''
The regulator said platform functionality was a key driver of competition and if the deal went ahead, NAB would not have the incentive to continue to sufficiently invest in and maintain the North platform and a significant source of competition would be lost.
NAB investors applauded the decision, sending the bank's shares up 89c, or 3.72 per cent, to $24.84 as concerns over the deal's execution risks, and a potential capital raising to fund it, dissipated. AXA APH's shares fell 36c to $5.08.
Analysts say the decision is not surprising and will force the big banks to look offshore for acquisitions.
Fat Prophets analyst Colin Whitehead said, ''Domestic opportunities are non-existent.
''The big four are just not going to be able to make significant acquisitions of this kind of scale.''
Credit Suisse's Arjan van Veen said, ''My view is that whatever NAB tries to do the ACCC will never let this happen.''
Goldman Sachs analyst Ben Koo told clients uncertainty over NAB's merger strategy would hang over its stock until the bank clarified its response to the decision.
NAB, AXA APH and its French parent, AXA SA, said they were considering the implications of the decision.
IOOF managing director Chris Kelaher said IOOF remained confident an acquisition of the North platform would deliver a strong competition outcome.
Meanwhile, the commission's decision, combined with the expiry of an exclusivity agreement between NAB, AXA APH, and AXA SA, overnight has thrown the spotlight on rival suitor AMP's tactics.
AMP is leaving its options open over a fresh bid for AXA APH and says it's ''very pleased'' with the ACCC's decision.
''AMP has always maintained that AXA is strategically attractive, but on the right terms,'' a spokeswoman said.
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