Singapore Exchange Ltd. plans to offer cash and stock worth about A$8.4 billion ($8.2 billion) to buy ASX Ltd., operator of the Australian stock exchange, said two people familiar with the matter.
Singapore Exchange will offer A$48 per ASX share and pay about 55 percent of the deal in stock and the remainder in cash, said the people, who asked not to be identified before an announcement scheduled for tomorrow. The cash portion will amount to A$22 for each ASX share, they said.
A new holding company will be formed out of the transaction with its shares primarily listed in Singapore, the people said. Depository receipts of the combined company will be traded in Australia, they added. Investors will receive 3 1/2 Singapore Exchange shares for each ASX share, one of the people said.
The combination would be the first between two exchange companies in the Asia-Pacific region and will create the area’s first pan-regional stock exchange. The takeover would bolster the global competitiveness of the Singaporean and Australian bourses by lowering costs, allowing new products and increasing the scale of their operations, one of the people said.
Singapore Exchange will appoint its chairman and chief executive officer to the combined company and ASX will appoint the deputy chairman, one of the people said.
The offer price represents about a 37 percent premium to the last closing price of ASX in Sydney. Trading in shares of both companies was halted on Friday, Oct. 22.
Asian Financial Center
Morgan Stanley advised Singapore Exchange and UBS AG is ASX’s adviser, the people said.
Matthew Gibbs, an ASX spokesman, and Magdalyn Liew, a spokeswoman for Singapore Exchange, each declined to comment.
“Singapore, keen to establish itself as the financial center of Asia, needs to attract liquidity to its stock exchange,” said Will Rhode, an analyst at TABB Group LLC, a Westborough, Massachusetts-based financial research and advisory firm focused on capital markets. “Just 27 firms trading more than $10 million per day on the Singapore exchange, compared to 300 names in Tokyo. The acquisition of ASX would be a solution to that woe.”
Competition in the region is increasing. Chi-X Global Inc., an electronic-trading platform, has won preliminary approval to become a competitor to ASX and is working toward starting Australian operations by March.
The Singaporean bourse and Chi-X Global, part owner of Europe’s largest alternative trading system, agreed in August last year to start the first exchange-backed dark pool in Asia.
Singapore Commodities Exchange, a unit of the Singapore bourse, faces competition from the Singapore Mercantile Exchange, which started operating in the city-state in August. SMX is backed by Financial Technologies (India) Ltd., which operates the largest commodity exchange in India.
The Australian and Singapore exchanges, whose operators have a combined market value of about $13.9 billion, are the Asia-Pacific region’s fifth-and eighth-largest stock markets respectively.
Australia’s stock market is worth about $1.36 trillion, compared with Singapore’s $558.2 billion, according to data compiled by Bloomberg. Even so, Singapore Exchange is the larger company, with a market value of about $7.86 billion, compared with ASX’s $6 billion.
Since Magnus Bocker, former president of Nasdaq OMX Group Inc., took over from Hsieh Fu Hua as chief executive of Singapore Exchange last year, the company has announced new initiatives to enhance the bourse’s position as an Asian capital markets hub. The exchange on Oct. 22 started trading 19 American Depositary Receipts of Asian companies to boost trading volumes.
In June, the bourse said it will invest S$250 million in a new trading system that will be the world’s fastest when it goes live in 2011. The following month, Singapore Exchange and the London Metal Exchange said they will introduce cash-settled metals futures contracts by the first quarter of next year.
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