Australia's largest merger in the financial services industry, between National Mutual and MLC, has collapsed.
This leaves the MLC and National Mutual, which rank No. 3 and No. 6 respectively in total funds under management, without a major boost in size, thus easing a potential threat to the leading group, AMP.
The announcement of the breakdown in talks to merge the two long-established life insurance offices' insurance and funds management businesses in Australia and New Zealand came only a week after the AMP Ltd., Sydney, released details of a privatization and stock exchange listing set for June 15 that involves a giveaway of shares to policyholders worth up to A$21 billion (US$13 billion).
MLC Ltd., a subsidiary of Lend Lease Corp., Sydney, and National Mutual Holdings Ltd., Melbourne, could not agree on management control of the merged company or on the procedure to follow if either partner wanted to dissolve the partnership.
Geoffery Tomlinson, managing director of National Mutual, called the news, "a disappointing setback." Both groups now have said they will be looking at other potential alliances or acquisitions, mainly in an attempt to achieve large cost savings.
MLC already has announced a partnership with the U.S.-based Vanguard Group, Malvern, Pa.
National Mutual, which has been weakened by the announced retirements of at least four senior executives, might look more to an Asian acquisition.
In a separate move, U.S.-based Fidelity Investments, Boston, has entered a strategic alliance with second-rank funds manager, Perpetual Funds Management, a division of Perpetual Trustees Australia Ltd., Sydney, to offer a range of retail international funds to the Australian market.
Fidelity sold its residual operations in Australia to Perpetual in 1993 after its earlier, failed attempt to enter the Australian market and has remained an adviser to Perpetual.
The international sector is expected to grow at a faster rate than the total retail sector -- by about 20% against 15% a year, according to Perpetual.
Meanwhile, the A$350 billion (US$218 billion) Australian superannuation system has been given a little more than 12 months to prepare for the first stage of the federal government's fund choice legislation.
The starting date, initially set for July 1 this year, was deferred in April because of delays in the legislation. It now has been set for July 1, 1999.
From that date, all new employees will have to be offered a choice of which superannuation fund receives their compulsory employer contributions, which rise to 7% of wages July 1 this year.
Existing employees will join the new system July 1, 2000. On the same date, new arrangements for lower-paid workers to opt out of the system also will apply. Employees will not, however, be allowed to move existing balances into the new system at that point. No announcement has yet been made on when balances in superannuation funds may be allowed choice.