A merger agreement has been signed by the Australian Securities Exchange (ASX) and the Singapore Exchange (SGX) to create the world's fifth largest exchange group, with a combined market capitalisation of approximately US$12.3 billion.
The two exchanges, which will form a new holding company – ASX-SGX Limited – to be listed on both the Singaporean and Australian exchanges, said the merger would “enable customers globally to capitalise on listing, trading, clearing and settlement opportunities”. The combined group will offer access to more than 2,700 listed companies from 20-plus countries as well as a wide range of equity, fixed income and commodity derivatives.
“The combination leverages the strengths of ASX through its listings, stock options and fixed income franchises, with SGX, the Asian gateway for international listings, equity futures and OTC clearing, to create the region's pre-eminent exchange group,” a joint statement read.
Both exchange groups have had to react to increased competition in their home markets from alternative trading venues. On 4 October, SGX received regulatory approval from the Monetary Authority of Singapore to launch Chi-East, a dark pool joint venture with market centre operator Chi-X Global. Chi-East is due to launch by mid-November and will trade stocks in Australia, Hong Kong, Japan and Singapore. Earlier this year, SGX committed to a S$250 million (US$195 million) investment in Reach, a new trading platform based on Nasdaq OMX's Genium INET technology.
In August, the ASX completed the transfer of market supervision responsibilities to national regulator the Australian Securities and Investment Commission, a move that was expected to result in the launch of alternative trading venues, including Chi-X Australia. ASX has responded to impending competition by launching three new trading platforms: Volume Match, a block trading service; Pure Match, which is aimed at high-frequency traders; and Trade Match, which is designed for traditional equities market participants. Like SGX, the ASX has also signed an agreement with Nasdaq OMX to implement its Genium INET platform.
Based on the audited financial statements of ASX and SGX, each for the financial year ended 30 June 2010, the combined exchange group will have pro forma revenues of approximately US$1.1 billion and pro forma earnings before interest and income tax of approximately US$700 million. Pre-tax cost savings are estimated to be US$30 million annually.
Under the terms of the merger, ASX shareholders will be paid a combination of A$22.00 (S$28.04) in cash and 3.473 new ordinary SGX shares for each existing ASX ordinary share. This values ASX at S$10.7 billion (A$8.4 billion) or A$48.00 per ASX share.
As well as the approval of both sets of shareholders, the deal is subject to regulatory approval by the treasurer of the Commonwealth of Australia, the Australian Securities and Investments Commission and the Monetary Authority of Singapore.