IFL Insignia Financial Ltd

The chairman of Australia's competition regulator Graeme Samuel on Wednesday stood aside from deliberations on National Australia Bank Ltd.'s (NABZY) bid for AXA SA's (AXAHY) Asia Pacific unit to avoid a perception of conflict of interest over his family's investment in the troubled Direct Factory Outlet shopping center chain that owes money to the bank.

Investors and analysts, however, said Samuel's exit from the Australian Competition & Consumer Commission's review of NAB's long-running bid for AXA Asia Pacific Holdings Ltd. (AXA.AU) is unlikely to have much impact on whether the regulator lets the deal go ahead.

"It isn't a one-man band. They've got processes and a team of people who know what the issues are and will see that they're addressed. So I can't see this making a material difference," said Peter Vann, head of research at Constellation Capital Management.

Representatives of the owners of the DFO shopping empire, which owes A$450 million to a lending syndicate including NAB, were locked in crisis talks with the banks on Wednesday to try and head off receivership after the banks issued notices warning they might call in the company's loans, said people familiar with the situation.

The ACCC said NAB and AXA Asia Pacific have been consulted and expressed no concern at Samuel's involvement in the review of the takeover.

"However, the commission accepted Mr. Samuel's position that he would cease to be involved in any further Commission deliberations on the NAB/AXA merger proposal," the regulator said in a statement.

"Mr. Samuel advised that he considered this course of action necessary to remove any perception of a conflict of interest arising from current issues concerning his family's investment in the DFO shopping center chain."

The ACCC surprised the market in April when it rejected NAB's plan to buy AXA Asia Pacific, arguing the biggest deal in Australia's financial services history would crimp competition in the market for supply of retail investment platforms, internet portals that link retail investors with the wide range of investment products that fund management companies provide.

However the regulator on Aug. 9 reopened its investigation into the bid after NAB made an undertaking to on-sell the target's retail investment platform North to wealth manager IOOF Holdings Ltd. (IFL.AU) and is scheduled to make decision on Sept. 9.

Samuel's family is a major investor via a blind trust in Austexx, which is the holding company for various entities operating under the DFO brand including South Wharf Retail and South Wharf Tower that run the heavily indebted South Wharf project at Melbourne's Docklands.

Korda-Mentha could be appointed as receiver to the two South Wharf companies later this week if an agreement isn't reached with the syndicate that also includes St. George Bank Ltd., Suncorp-Metway Ltd. (SUN.AU) and Bank of Scotland International, with each of the banks owed about 25% of the total borrowing, three of the people familiar with the situation said.

The banks lost confidence in the business after a dispute between the Austexx equity partners over whether to borrow more money to complete work on the South Wharf DFO site, one of the people said.

One of the partners--a trustee managing Samuel's blind trust--had opposed further borrowing after Samuel discovered that successful sites to which he thought his investment had been confined were used as collateral for debt-funded expansion into other areas, the person said.

If the two South Wharf companies collapse, that could have a snowball effect on other DFO sites as the South Wharf project has been used as collateral for other sites, the person said.

A spokeswoman for the ACCC said Samuel would not be making any comment on his investment in DFO.

Spokespeople for St George Bank, Suncorp-Metway, NAB and BOS International declined to comment on the progress of the talks.

Under NAB's takeover proposal, 55% owner AXA SA would retain the Asian assets of AXA APH, while minority shareholders would be given the choice between A$6.43, or 0.1745 NAB share and A$1.59 for each of their shares in the target.

A lower cash and share offer by AMP Ltd. (AMP.AU) of 0.6896 of its own shares and A$1.92 for each AXA APH share was rejected by the target's independent directors in favor of the NAB bid in December.

-By Rebecca Thurlow, Dow Jones Newswires; 61-2-8272-4679; rebecca.thurlow@dowjones.com

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