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Oct 24, 2010

SGX and Australian exchange announce merger

Deal would create second-largest listing venue in Asia, but faces significant regulatory hurdles

Singapore Exchange (SGX) and the Australian Stock Exchange (ASX) have announced an $8.4 bn merger as competition intensifies among bourses in Asia.  

The tie-up would see the creation of the second-largest listing venue in the Asia-Pacific region, with more than 2,700 listed companies, although the deal must pass a number of regulatory hurdles before it can be put to shareholders.

With Asia’s profile as an investment center rising fast, the region’s stock exchanges are battling it put for market share and the strongest international brand.

SGX hopes the tie-up with ASX, plus a recent deal to cooperate with NASDAQ OMX, the global exchange operator, will help it compete more effectively with rival exchanges in Hong Kong, Shanghai and Bombay.

The main obstacle to the deal is Australia’s 15 percent cap on foreign ownership, which would need to be waived by regulators to allow the merger to go through. Approval is also needed from the Australian Securities and Investments Commission and the Monetary Authority of Singapore.

Given the regulatory work ahead, SGX and ASX anticipate the deal will not be put to a shareholder vote before the first quarter of 2011. The merger could then be implemented in the second quarter of the year, they say.

Under the proposed deal, SGX would acquire all the shares of ASX and create a combined group called ASX-SGX Limited. The new entity would then be listed in Singapore and Australia. Both SGX and ASX would maintain their existing brands, however.

The two exchanges say public companies will benefit from the merger through an increased profile among the global investment community and access to a larger pool of liquidity.

‘The combination of ASX and SGX, offering innovative new products and services to the market, will allow customers to maximize future opportunities, where Asia-Pacific takes center stage globally as the source for capital, wealth creation and trading opportunities,’ comments Magnus Böcker, CEO of SGX, in a statement.

Böcker, a former president of NASDAQ OMX, is the person driving SGX’s ambitious expansion plans. Only last month he agreed a separate deal with his old employer to cooperate on a new trading platform called GlobalQuote, which quotes the American depositary receipts of Asian companies listed in the US.