Axa Mony Acquisition

Case Study – AXA MONY

1.Why is AXA bidding for MONY?

If AXA merged with MONY, MONY’s 1,300 sales agents would increase AXA’s US sales force by almost 25%, a level of growth that AXA cannot achieve by itself. Moreover, the two companies’ distribution systems and product ranges were both complementary.

Does the deal make sense for AXA; for MONY shareholders; and for management?

For AXA, this deal could simply increase its insurance operations in the United States. From this deal, AXA could gain benefit from MONY’s some important growth locations and wholesale distribution. MONY could also offer AXA with some new life products.

For MONY shareholders, they criticized this deal. They thought MONY was undervalued.

For management, they thought that MONY was too small to operate effectively in its industry. So they believed that this deal would bring strategic distribution and raise the value of the firm.

As a MONY shareholder, what concerns would you have about the deal?

I would concern that the AXA’s offer was too low. MONY should invite competing bids through an auction in order to raise the price. I would also concern that MONY’ management was keen to sell the company only for their own compensation payment.

2. How did AXA finance the takeover bid? Explain the structure that AXA used. Why did AXA use this structure?

AXA issued 110,245,309 ORANs to fund the bid.

If the AXA-MONY takeover deal were not completed by Dec. 22, 2004, the ORANs would pay off their face value of €12.75, plus interest at Euribor. But if the takeover deal went through, the ORANs would each convert into one share of newly-issued AXA stock.

What effects, if any, do you think this method of financing has on the likelihood of the deal succeeding?

This method of financing indicated that AXA had good performance of equity. AXA did not need to raise equity. So this might be an attractiveness for the acquired company.