AMP bid hope as Oz bank bags stake

AUSTRALIA'S largest bank, the National Australia Bank, has emerged as the mystery buyer of a major stake of struggling financial group AMP but says it would not make a full bid while the company still owns its ailing UK businesses.

NAB, owner of Britain's Yorkshire, Clydesdale and Northern banks, snapped up 2.25% of AMP after the Australian market closed yesterday raising its holding to 5.4%. NAB paid just over A$200m (£80m) for the new shares, but failed to fill its original order to buy more than 10% of the target.

AMP shares soared 22% in Sydney today to A$6.28, above the A$6 per share paid overnight by the NAB but still well below the A$21 NAB offered in 1999, when it informally proposed a merger with AMP.

Hit by a succession of problems in its UK businesses, which include Henderson Global, NPI and insurer Pearl, AMP shares have fallen as low as A$4.50 and the company recently posted a A$2.2bn half-yearly loss, the biggest in its 150-year history.

NAB chief executive Frank Cicutto today confirmed rampant speculation that NAB had bought into AMP, describing it as a 'strategicî investment. 'The National has no interest in acquiring AMP while AMP owns its UK business,' Cicutto said.

AMP is in the process of splitting its robust Australian operations from its UK businesses, and the process expected to be completed - given approval from regulators in both countries - by the end of the year.

'They are probably getting in there now while the stock is cheap and building a position for a takeover after the demerger,' said one Sydney analyst.

'It makes a lot of sense, and AMP is really the only realistic consolidation target in the financial services industry at the moment.'

Australia's Treasurer Peter Costello said he would consider any application from a shareholder to lift its stake in AMP beyond the 15% level, with a decision based on 'the national interest'.

By law, a shareholder cannot hold more than 15% of a financial institution without government approval. The market has been waiting for a move on AMP, and NAB was unable to fill its original order for 174m shares at A$5.60.

With fund managers now factoring in a possible takeover, NAB was forced to raise its offer to A$6, and was only able to buy 34m shares.