ASEAN KEY DESTINATIONS
Canberra kills SGX/ASX Merger
The Australian government said on Tuesday it intended to reject the Singapore Exchange’s proposed $7.8 billion takeover bid for Australian stock-exchange operator ASX on national interest grounds.
SGX and ASX wanted to team up to cut costs, fight growing pressure from alternative trading platforms and avoid being left behind as rivals in North America and Europe get together.
But Australian Treasurer Wayne Swan, under pressure from intensifying political opposition, said he had serious doubts about the bid and intended to reject the deal. Australia’s Foreign Investment Review Board “informed SGX that I had serious concerns about the proposal and that, subject to further consideration, I intended to accept the unanimous FIRB advice that the takeover would not be in the national interest,” Swan said.
A final decision had not been made, he added. If the deal does fail, it will be the latest in a number of cross-border transactions to fall foul of politicians, including BHP Billiton’s $39 billion bid for Canada’s Potash Corporation last year. It could also bode ill for other major exchange deals before regulators and politicians.
“Governments are getting pretty tough on lots of things,” said Jason Beddow, chief executive at Argo Investments. “I wouldn’t say governments are particularly business-friendly at the moment.”
SGX has not decided whether to drop its bid or pursue further dialogue with the FIRB, but the deal was not dead yet, two sources familiar with the transaction said.
Share moves showed the market doubted the deal could be saved. ASX shares fell as much as 4 percent in late afternoon Sydney trade, while SGX shares spiked more than 6 percent.
Investors said political hurdles were unlikely to be met without radically changing the bid.
“Everybody else across the world seems open to exchange consolidation except Australia,” said Mark Daniels, head of equities at Aberdeen Asset Management, which owns ASX shares. “I don’t know why it should be rejected on national interest. ASX and SGX will certainly be disappointed. Having said that, the ASX is a very well run company, that is the consolation here.”
Before the announcement on Tuesday, analysts said SGX could become a target if its ASX bid fails. “A bid for SGX from Western exchanges cannot be ruled out as they lack the all-important Asian footprint,” said Jaj Singh, a UBS analyst in Singapore.
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