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Wednesday, May 10, 2017

Why Axa Replaced Kraus Atop AB

News summary by MFWire's editors

The head of AB's [profile] ultimate parent company is shedding some light on why Peter Kraus and most of AB's board were replaced less than two weeks ago. Meanwhile, AB's U.S. parent is spinning off.

Thomas Buberl
The way Axa CEO Thomas Buberl tells it, the AB management and board changes were all about a succession planning dispute. Indeed, fundsters whisper that 64-year-old Kraus, who was expected to retire in January 2019 (when his contract expires), was working on picking his successor and that Axa, which owns 63.8 percent of AB, wanted more say.

"None of the internal candidates presented to us were up to the mark," Buberl tells the Wall Street Journal.

Indeed, Axa picked an AB outsider, 55-year-old Seth Bernstein, to take over as AB CEO. (Seth Bernstein is no relation to Sandy Bernstein, the late founder of what is now AB.)

Yet Buberl's comments do not explain the abrupt timing of the AB changes, made just one day after Kraus was talking to analysts on AB's Q1 2017 earnings call.

Buberl tells the WSJ that the AB management and board changes are unrelated to Axa's IPO plans for its U.S. business. This morning Buberl, confirms that Axa plans to sell a minority stake in the French multinational insurer's U.S. business in the first half of 2018. That U.S. business includes Axa's U.S. life insurance and retirement plan businesses, as well as its majority stake in AllianceBernstein Holding.

Bloomberg, Reuters, and TheStreet also reported on Axa's U.S. IPO move.

Axa's U.S. business would have a book value of around $14 billion to $15 billion, unnamed sources tell the WSJ. AB alone has a market cap of $2.03 billion, making Axa's AB stake worth about $1.30 billion (or more, given that it's a majority stake). AB has $498 billion in AUM as of March 31, so at current market cap it's worth about 0.408 percent of its AUM.

"With Seth Bernstein, the new AB CEO, we have the unique opportunity together to create a leading US life insurance, annuity and asset management company," states Mark Pearson, president and CEO of Axa Financial in the U.S.

"At AB, we're excited to be taking this next step in our journey with AXA US and the AXA Group," Bernstein states. "We'll continue to manage assets for both entities, and look forward to further aligning our businesses from here with new services and opportunities." 

Edited by: Neil Anderson, Managing Editor

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