The BNP Paribas Group has entered into exclusive negotiations with AXA to acquire 100% of AXA Investment Managers (AXA IM), representing close to €850 billion assets under management, together with an agreement for a long-term partnership to manage a large part of AXA’s assets.
“AXA Investment Managers has been a homegrown success story for the AXA Group. Over the past 25 years, we have built an exceptional franchise anchored in investment expertise, a relentless client focus and a proven track record on sustainability. Thanks to the quality of its teams, AXA IM is today a leading player, notably in Alternatives in Europe.” said Thomas Buberl, CEO of AXA. “By joining forces with BNP Paribas, AXA IM would become a global asset manager with a wider product offering and a mutual objective to further their leading position in responsible investing. I would like to thank all AXA IM employees for their unwavering commitment, and their continued focus on delivering value for our clients.”
BNP Paribas Cardif, the insurance business of BNP Paribas, after having directly proceeded to the proposed transaction as principal, would have the opportunity to rely on this platform for the management of up to €160 billion of its savings and insurance assets.
With the combined contribution of BNP Paribas’ asset management platforms, the newly formed business, which total assets under management would amount to €1.5 trillion, would become one of the largest European players in the sector.
Specifically, it would become one of the biggest European firms in the management of long-term savings assets for insurers as well as pension funds, with €850bn of assets, leveraging platforms of public and private assets. The acquisition would also allow the combined businesses to benefit from AXA IM Alternatives’ market position and track record in private assets which could drive further growth with both institutional and retail investors.
“This project would position BNP Paribas as a leading European player in long-term asset management. Benefiting from a critical size in public and alternative assets, BNP Paribas would serve its customer base of insurers, pension funds, banking networks and distributors more efficiently. The strategic partnership entered into with AXA, the cornerstone of this project, confirms the ability of both our groups to join forces. This major project, which would drive our growth over the long-term, would represent a powerful engine of growth for our Group.” said Jean-Laurent Bonnafé, director and CEO, BNP Paribas.
The agreed price for the acquisition and the set-up of the partnership is of €5.1bn at closing, expected mid-2025.
With a CET1 impact of circa 25 bp for BNP Paribas, the expected return on invested capital of the transaction would be above 18% as soon as the 3rd year, following the end of the integration process.
The signing of the proposed transaction, expected by the end of the year, is subject to the information process and consultation of the employees’ representative bodies. The closing of the transaction is expected by mid-2025 once regulatory approvals have been obtained.
“The creation, within the Investment & Protection Services (IPS) division of the BNP Paribas Group, of a European leader in the management of long-term insurance and savings assets, would enable the IPS division to exceed EUR 2 trillion of assets entrusted by its clients. This operation would allow BNP Paribas Cardif to benefit from premium access to the services of an asset management expert on the asset classes required for insurance management. The combined expertise of the BNP Paribas Asset Management and AXA IM teams in public and private assets, as well as their leadership in sustainability, would be valuable assets to better meet future needs of clients.” said Renaud Dumora, Deputy Chief Operating Officer, Investment & Protection Services, BNP Paribas.
Analysts at Morgan Stanley wrote, “While the 18% return on capital that BNP expects by year 3 is well above BNP’s current ROTE (12.5% in 1H24), we think the market may ultimately compare this use of capital vs a buyback. If BNP were to conduct a buyback for 25bps of capital (~€1.8bn) today (which carries no execution risk), then the EPS accretion would be ~3% on 2024, whereas we estimate here an earnings accretion of ~2.5% by 2028 (year 3). While this may at first sight seem disappointing, BNP has shown before (for example in CIB) the value of creating scale in a product platform. We think we would need more details (for example, full synergies expected, details as to why Cardif is only including €160bn of AUM rather than the full €265bn, details on future partnership between BNP and AXA) before fully assessing the deal, but from a longer-term perspective we could see value. We expect the deep dive on insurance that BNP will hold in Q4 will shed some light on the strategic rationale for the deal and other useful details (like synergies).”
The announcement followed positive results from AXA of €4.2 billion for the first half of the year, 7% better than analyst consensus expectations. The beat was largely due to the insurer’s property and casualty (P&C) business. Its asset management book came in at €204 million where the consensus had been €195 million.
The strategic decision to focus on its core insurance business through the sale of its asset management book, under which AXA enters into a long-term partnership in which BNP Paribas will provide investment management services for AXA, includes a €3.8bn anti-dilutive buyback from AXA to offset the €400 million expected earnings, following the close of the transaction. AXA expects the combination of the transaction and buyback to have a neutral impact on solvency. AXA’s strategic target of 6-8% annual growth from 2023-26 would remain intact, according to Morgan Stanley analysts.
AXA also announced an agreement to acquire Nobis Group, a predominantly Italian P&C company, for €423 million with a potential earn-out of €55m. Nobis reported €500m of gross written premiums and €35m of net income in 2023. AXA expects the acquisition to close before the first half of 2025.
Following the recent announcement that Amundi Intermediation is to takeover management of the trading desks at Groupama AMA, the french asset management sector appears to be rolling up to build scale across front office operations.
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