UPDATE 1-AXA Asia Pac's fate seen in hands of French parent

* Analysts see AXA SA as key for saving deal

* AMP ready to move but weak share price a deterrent - source

* Analysts start pricing in no deal (Recasts, adds comments, updates share price)

By Narayanan Somasundaram

SYDNEY, Sept 15 (Reuters) - France's AXA SA needs to sweeten terms to resurrect a deal to sell the Australian and New Zealand divisions of wealth manager AXA Pacific after an agreed $12 billion deal with National Australia Bank (NAB) collapsed, analysts said.

On Tuesday, NAB, which trumped Australian wealth manager AMP with a higher bid in December, withdrew from the deal due to regulatory opposition leaving AXA Asia Pacific without a suitor and challenging AXA SA's strategy to focus on Asia, where it has operations in 8 countries. [ID:nSGE68D0LL].

Under AMP's lapsed deal, initially proposed late last year, AXA Asia Pacific, which manages A$78 billion in funds, would be carved up into its Australia and New Zealand operations and Asia businesses with AMP taking the first and AXA SA the Asian units.

Analysts now see a number of possible outcomes for a deal, which could change the structure of Australia's $1 trillion wealth management market, the world's fourth largest.

AMP could re-submit its lapsed offer, or raise it slightly, while AXA SA could improve its offer for the Asian operations or ultimately there could be no deal, with the last two options gaining traction.

"I think it is a taller stretch for AMP now than before. The moves by the French are the most important in the deal," Peter Vann, a fund manager at Constellation Capital said.
For a NEWSMAKER on NAB CEO Clyne: [ID:nSGE68805Q] For an ANALYSIS on AXA SA and Asia [ID:nLDE64R0MV] Millionaires' growth graphic: http://link.reuters.com/haj33m For StarMine comparative data: http://link.reuters.com/feg42p Graphic on global fund assets: http://link.reuters.com/rap42p Graphic on top fund managers: http://link.reuters.com/can42p

AXA SA has so far only said it is reviewing its Asian strategy. AMP has said it is still interested in AXA Asia but only under the right terms.

"AMP is ready to move. The question is what does AXA Asia Pacific want," said a person with direct knowledge of the situation.

"AMP will step up talks with the French to see what their position is on this deal."

But a deterrent may be AMP's weak share price, which has fallen a quarter this year, sparking speculation that AXA SA will need to act to salvage the deal and its Asian strategy that has been held up for nearly a year.

"With takeover interest disappearing at least in the short run. We believe that this (status quo) remains a reasonably strong possibility," JPMorgan analyst Siddharth Parameswaran said.

The gap between AMP's offer of A$5.40 for each AXA Asia Pacific share at current share prices and AXA Asia's expectation for an offer of A$6.43 a share is quite wide.

Analysts said AMP could increase the share portion of the deal from 0.69 to 0.81 to take it bid to A$6 a share and still see an earnings boost.

NAB, which trumped AMP in December last year, withdrew its bid after trying for 9 months and bowing to a second rejection by Australia's competition regulator.

The regulator opposed NAB on the grounds it would weaken competition in retail investment platforms -- an internet portal that binds wealth manager , products and clients.

As a result none of the other big banks, except Australia and New Zealand Banking Group , could make a play for AXA Asia. ANZ has said its interest lies in expanding in Asia.

AXA Asia shares were up 0.8 percent in trading on Wednesday afternoon, slightly outpacing the broader market <.AXJO>.

The shares, which fell to pre-deal levels last week, are still down 5 percent since the second regulatory block last week.

NAB shares have risen 7.5 percent since then on relief the country's biggest lender would not have to sell shares to fund the deal. AMP shares have remained steady.

(Editing by Ed Davies)