A weekend of rumours were brought to an end this morning with the confirmation that Resolution is in talks to acquire part of the UK business of AXA.
The £2.75bn acquisition would be for the UK protection, annuities and group pensions businesses. The acquisition would be funded by a £2bn rights issue, £500m of deferred notes and the rest in bank debt.
If the acquisition goes ahead, Resolution would then merge AXA with Friends Provident; another recently acquired UK life assurance business. The aim here would clearly be operational cost savings by merging the two organisations.
This acquisition would leave behind several valuable units at AXA, including their wealth management business. It appears at this stage that AXA Winterthur Wealth would continue to be part of the AXA UK operation.
Investors in AXA policies that would be managed in the future by Resolution are right to raise concerns that this acquisition could result in them being left in ‘zombie’ funds. This is the name for a With Profits investment fund which is closed to new business. Critics suggest that zombie funds suffer worse performance than funds that are actively seeking new investments.
It will be interesting to keep an eye on developments on this story and see if the acquisition is successful. AXA policyholders should consider reviewing their investments should the deal go ahead.
