Singapore Exchange Announces Merger with ASX, Forming World’s FifthLargest Exchange
For Immediate ReleaseAfter weeks of intense negotiations, the Singapore Exchange (SGX) unveiled plansto takeover Australia’s ASX for $10.7 billion, as part of the effort to create theworld’s fifth largest stock market.However, the planned merger – which will bring much larger exchange – is stillsubjected for regulatory approval of both countries, but the two exchanges havealready hinted a “go-ahead” signal from regulators.If the merger will push through as planned, the combined listings of the twoexchanges would total 2,739 companies – beating Japan in the top position in theAsia-Pacific’s derivative and real estate investment trusts markets.Based on the terms of the agreement, the Singapore Exchange will pay at least$10.7 billion (Singapore dollar) or $22 (Australian dollar) plus an additional 3.473new SGX shares for each ASX share – a premium of 37.3 percent to the currenttrading price of A$34.96.Amid better market sentiments and release of new products, SGX shares weretraded at S$9.54 on Friday worth some S$5.8 billion. Earlier, stocks surged by atleast 20 percent over three consecutive months and hit this year’s high of S$10.26 in October.But despite the hype over the merger, cross-listing opportunities and revenueflow remained unclear to many stockholders.Following the announcement, SGX shares dropped by 6.18 percent before closingat S$8.95 while ASX shares spiked up to this year’s high of 6.79 percent atA$41.75.According to SGX, the merger agreement would be financed through a S$3.5billion bridging loan and the additional S$512 million in its coffers, which generatea 44.9 percent net gearing with zero debt. The SGX also said that it would not raise additional fund through placement orstock rights offers, but it stressed that it will cut dividend payout ratio from 80percent to a minimum of 70 percent.SGX chief executive officer Magnus Bocker, in an interview with members of theAustralian media, said that the planned takeover of the ASX would create scalethat would attract more listings within the region. The merger would also widenthe products being offered in both exchanges.Bocker also believes that the merger would create better competition amongstockholders for future initial public offerings.For his part, ASX chief executive officer Robert Elstone said that the Australiangovernment has considered the best option for its national interest, rather thanconfining the exchange to the country’s franchise.He also said that there have been informal discussions, which remainedconfidential, as the country prepares itself for a bigger international presence.