SYDNEY - Australian wealth manager AMP Ltd will not seek to extend its exclusive agreement with France's AXA SA on a joint $11.4 billion bid for AXA's Australian unit, sources said, opening the door for rival bidder National Australia Bank Ltd to start talks with AXA SA.

A deadline for the exclusive talks to buy AXA Asia Pacific Holdings Ltd, 54 percent-owned by the French insurer, lapses on Saturday.

AMP and NAB went after AXA's Australia business late last year, eyeing a larger share of Australia's $900 billion wealth management industry, which promises to grow faster as the population ages and as government considers raising compulsory retirement savings.

While a deal is one of the last remaining consolidation opportunities in the Australian financial services sector, for AXA SA it gives full control of the Asian business. Winning AXA AP would put NAB on track to be the country's top player in banking, insurance and wealth.

Ending the AMP/AXA SA agreement would pave the way for NAB, Australia's largest lender, to open talks with the French insurer to go ahead with its $11.8 billion bid.

AXA AP's independent directors have favored NAB's all-cash proposal over AMP and AXA SA's cash and stock offer.

It's set to be an open game after the deadline, I don't think there will be any exclusivity on this deal for a while, said one source with direct knowledge of the matter.

Both proposals hinge on AXA SA agreeing to buy AXA Asia Pacific's Asian businesses, and approval from Australia's competition watchdog -- a major hurdle in a market where the government is nervous about the power of big banks.

The competition watchdog is expected to come out with its findings on AMP/AXA SA's bid on February 10 and NAB's offer on March 18.

For NAB's bid to succeed, it needs regulatory approval. If the regulator says no, then AMP doesn't need to do anything, said Arjan Van Veen, director of Australian equities research at Credit Suisse.

Unless AXA SA wants to lock into some sort of agreement with NAB, there's no rush for AMP to move, said Van Veen, adding AXA SA was better off talking to multiple parties than locking into an agreement with one.

AMP shares extended gains on Wednesday to close up 1.5 percent in its sharpest gain in two weeks, as the uncertainty and the deal overhang on its financials eased. NAB dipped 0.2 percent and AXA AP was flat. The benchmark index .AXJO rose 0.9 percent.

AMP would prefer to let the exclusive agreement expire and wait for the regulatory review of NAB's proposal before staging a comeback, the sources said.

At the moment there's some time to go and significant regulatory issues, which are not likely to be resolved this week or next week, said another source close to the matter.

The sources declined to be named as talks between AMP and AXA SA are private. AMP and AXA SA declined to comment.

AXA SA is in no rush for now to back one or other party and could afford to sit back and watch events unfold in the high-stakes takeover tussle.

AMP is advised by UBS and Caliburn Partnership, while Deutsche Bank is advising AXA SA. AXA Asia Pacific is advised by Macquarie Group and NAB by JP Morgan.

(Reporting by Sonali Paul, Narayanan Somasundaram and Denny Thomas; Editing by Balazs Koranyi, Muralikumar Anantharaman and Ian Geoghegan)

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