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Singapore Exchange Announces Merger with ASX, Forming World’s Fifth Largest Exchange
Singapore Exchange Announces Merger with ASX, Forming World’s Fifth Largest Exchange
After weeks of intense negotiations, the Singapore Exchange (SGX) unveiled plans to takeover Australia’s ASX for $10.7 billion, as part of the effort to create the world’s fifth largest stock market.
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(pr4links.com)
29/10/2010
After weeks of intense negotiations, the Singapore Exchange (SGX) unveiled plans to takeover Australia’s ASX for $10.7 billion, as part of the effort to create the world’s fifth largest stock market.
However, the planned merger – which will bring much larger exchange – is still subjected for regulatory approval of both countries, but the two exchanges have already hinted a “go-ahead” signal from regulators.
If the merger will push through as planned, the combined listings of the two exchanges would total 2,739 companies – beating Japan in the top position in the Asia-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 3.473 new SGX shares for each ASX share – a premium of 37.3 percent to the current trading price of A$34.96.
Amid better market sentiments and release of new products, SGX shares were traded at S$9.54 on Friday worth some S$5.8 billion. Earlier, stocks surged by at least 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 revenue flow remained unclear to many stockholders.
Following the announcement, SGX shares dropped by 6.18 percent before closing at S$8.95 while ASX shares spiked up to this year’s high of 6.79 percent at A$41.75.
According to SGX, the merger agreement would be financed through a S$3.5 billion bridging loan and the additional S$512 million in its coffers, which generate a 44.9 percent net gearing with zero debt.
The SGX also said that it would not raise additional fund through placement or stock rights offers, but it stressed that it will cut dividend payout ratio from 80 percent to a minimum of 70 percent.
SGX chief executive officer Magnus Bocker, in an interview with members of the Australian media, said that the planned takeover of the ASX would create scale that would attract more listings within the region. The merger would also widen the products being offered in both exchanges.
Bocker also believes that the merger would create better competition among stockholders for future initial public offerings.
For his part, ASX chief executive officer Robert Elstone said that the Australian government has considered the best option for its national interest, rather than confining the exchange to the country’s franchise.
He also said that there have been informal discussions, which remained confidential, as the country prepares itself for a bigger international presence.
Asiabiz, a Singapore company specialist thinks that this merger will be a good development for Singapore and Australia as it will provide a whole new avenue for growth since the merger should create a healthy competition amongst stockholders keen on the development.
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