ASX Shares Jump as Takeovers Boost SGX-Bid Confidence
ASX Ltd. (ASX) shares climbed the most in more than three months in Sydney trading on optimism exchange takeover deals elsewhere will boost the chances of its merger with Singapore Exchange Ltd. winning approval in Australia.
Shares in ASX, operator of the nation’s biggest bourse, jumped as much as 5.2 percent in Sydney, the most since Singapore Exchange (SGX)’s takeover proposal was announced on Oct. 25, and closed 4.7 percent higher at A$38.41 on the Australian stock exchange. Singapore Exchange rose as much as 2.3 percent.
Deutsche Boerse (DB1) AG is in advanced talks to buy NYSE Euronext in an all-stock transaction that would create the world’s biggest exchange operator, accelerating a day of takeovers yesterday that began with London Stock Exchange Group Plc (LSE)’s acquisition of Canada’s TMX Group Inc. The latest mergers may bolster the case for approving SGX’s bid in pursuit of the Australian government’s stated aim of turning Sydney into a global financial hub.
“This gives those in favor of the SGX deal a little more ammunition,” said Jason Teh, who helps manage about $3.1 billion at Investors Mutual Ltd. in Sydney. “It shows that the rest of the world is clearly moving in this direction and the question now is whether Australia will adopt what’s happening elsewhere in the world.”
ASX, SGX Shares
Singapore Exchange’s shares climbed as much as 2.3 percent to S$8.53 today in Singapore, before paring gains. The shares have lost 6.2 percent since the merger announcement. ASX shares have dropped 8 percent in the same time, compared with a 4.3 percent gain for Australia’s benchmark S&P/ASX 200 Index. (AS51)
“Certainly the market is taking it as positive for increasing the probability of the SGX-ASX deal to get Australian approval,” Matthew Smith, an equity analyst at Macquarie Capital Securities (Singapore) said in an e-mail. “Perhaps this reflects a view that the trend of global exchange mergers is back on, and the Australians will have to play along.”
Singapore Exchange offered to buy ASX on Oct. 25 for A$8.4 billion ($8.5 billion) in a cash and share deal that would be the first merger between two exchange companies in the Asia-Pacific region. The bid, which won approval from Australia’s competition regulator on Dec. 15, still requires the support of Treasurer Wayne Swan, the Foreign Investment Review Board, the Reserve Bank of Australia, the Australian Securities & Investments Commission, and parliamentarians, several of whom have opposed the sale.
“This almost seals the fate of the ASX-SGX deal as it potentially sets the precedent for both industry direction and regulatory acceptance of consolidation,” said Angus Gluskie, who manages about $350 million at White Funds Management Pty in Sydney.
Since 2000, there has been at least $95.8 billion in completed acquisitions at exchanges worldwide, including NYSE Group’s purchase of Euronext NV and Nasdaq Stock Market Inc. (NDAQ)’s takeover of OMX AB, according to data compiled by Bloomberg. The proposed Deutsche Boerse combination would unite equity and derivatives platforms from the U.S. and Germany to France, the Netherlands and Portugal.
“These developments highlight the global trend toward exchange consolidation in response to the dynamic forces brought about by technological, competitive and regulatory change,” Leeanne Bland, an ASX spokeswoman, said by e-mail.
Lorraine Chan, a spokeswoman for Hong Kong Exchanges and Clearing Ltd., the city’s bourse, said changes in financial markets mean it’s open to considering “international opportunities for alliances, partnerships and other relationships.” Shares in the world’s largest exchange operator by market capitalization had their biggest intraday decline since October today.
Tokyo Stock Exchange President Atsushi Saito said the bourse, which has a 4.99 percent stake in Singapore Exchange, is also open to potential tie-ups but is not in talks at the moment.
The latest takeover proposals make it easier for those in favor of the ASX-Singapore Exchange tie-up “to argue that the ability to compete internationally with other mega-exchanges may be diminished if regulators decide not to approve the merger between the Australian and Singapore exchanges,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne.
Even if Singapore Exchange’s bid wins all regulatory approvals in Australia, laws amending the Corporations Act will need to be passed in both houses of parliament. The minority Labor government led by Prime Minister Julia Gillard needs the support of four independent or Greens lawmakers to pass a bill to raise ASX’s foreign ownership cap to make way for the takeover.
‘Good for Business’
Independent members of parliament Rob Oakeshott and Tony Windsor plus West Australian National Tony Crook say they haven’t made up their minds on the merger and want to hold further talks with the government.
“The feedback I have had so far is that this deal would be good for business in Australia,” Crook said in an interview today. “I am open-minded about it and want to have some further discussions.”
Singapore Exchange’s bid to win Australian parliamentary approval for its offer for ASX “will be one of the key reform battlegrounds for 2011,” Oakeshott said in a Dec. 16 interview.
Greens leader Bob Brown told reporters in Canberra today he remained opposed to the Singapore Exchange bid.
“I don’t think the latest merger news will have a significant impact on the dynamics in place before this,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors Ltd., which manages about $93 billion. “Those that opposed the ASX deal did so already knowing that we’re living in a globalized world and that there is a case for mergers and acquisitions.”
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