National Australia Bank Limited (NAB) said it has agreed certain key terms with AXA Asia Pacific (AXA) to acquire its Australian and New Zealand businesses. AXA AP’s independent directors recommended that shareholder accept the deal, which values the businesses at $4.6 billion.

Under the terms of the Proposal, AXA AP shareholders will have the option to receive either $6.43 per share in cash, or $1.59 in cash and 0.1745 NAB shares for each AXA AP share.

Yesterday, AXA AP shares closed at $5.65 after Axa SA and AMP increased their proposed bid for Axa APH to $6.24. Meanwhile NAB ended the session at $27.95.

AXA AP formally rejected the AMP/AXA SA revised proposal.

In addition, under the NAB proposal AXA AP shareholders will receive up to 9.25c dividend for their AXA AP shares in relation to the second half 2009 results. The shares issued under the Proposal will also be entitled to receive NAB’s interim dividend payable in July 2010

NAB noted that its proposal would provide AXA AP shareholders with the certainty of an all cash option.

“The Proposal will also offer AXA AP shareholders the flexibility to receive part of their consideration in NAB shares and participate in the benefits of the combined business,” NAB added.

AXA AP’s Independent Directors Committee said their recommendation was subject a number of conditions including the lack of a superior offer.

Additionally, the committee said their approval would also be subject to an independent expert report concluding the deal was fair, reasonable and in the best interest of AXA AP’s shareholders.

NAB said the consideration would be funded from a combination of an equity raising of approximately A$1.5bn, the scrip offer and existing capital resources.

The equity raising will be an underwritten pro-rata offer to allow all NAB shareholders to participate and will most likely be undertaken once due diligence is completed, an agreement is reached with AXA SA, and binding transaction documentation has been executed.

NAB advised that based on a reported Tier 1 ratio of 8.96% as at 30 September 2009, the pro-forma NAB Tier 1 ratio post completion of the acquisition of AXA AP, including the equity raising of $1.5bn and assumed 50% cash acceptances, is expected to be approximately 8.9%.

NAB said the combination of MLC and AXA Australia and New Zealand would hold more than $144.3 billion in funds under administration and management.

“Combining AXA Australia and New Zealand and MLC will establish a market leader in the Australian and New Zealand life insurance and wealth management sectors,” NAB boasted.