Oct. 25, 2010, 2:21 a.m. EDT

SGX slides, ASX soars after merger news

Bourses aim to strengthen regional presence with the combination

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By V. Phani Kumar, MarketWatch

HONG KONG (MarketWatch) — Shares of Singapore Exchange Ltd. tumbled Monday, and those of Australia’s ASX Ltd. soared, after the Singaporean bourse operator confirmed an 8.4 billion Australian dollar ($8.3 billion) stock-and-cash merger deal for ASX.

SGX said the deal would leverage the duo’s reach and combined strength within the Asia-Pacific region. The move comes at a time when competitors, such as Hong Kong Exchanges & Clearing Ltd. and mainland Chinese stock exchanges, are expanding rapidly through new listings.

“The proposed combination will bring together the complementary businesses of two successful exchanges in the Asian time zone, with internationally recognized regulatory standards,” SGX said in a statement.

/zigman2/quotes/205682473/delayed ASX 89.83, -0.54, -0.60%

Under the terms of the deal, SGX will acquire all outstanding common shares in ASX for A$22 each in cash and 3.473 new SGX shares. SGX shares ended at 9.54 Singapore dollars ($7.37) on Friday, implying a valuation of A$8.4 billion, or A$48 for each ASX share.

The price marks a 37.3% premium to ASX’s Friday closing price of A$34.96 in Sydney.

SGX said that pre-tax cost synergies and other transaction-related cost savings are estimated to be about $30 million annually on existing cost structures.

In Monday’s trading after the deal’s announcement, ASX /zigman2/quotes/208455670/delayed ASXFY -1.12%   /zigman2/quotes/205682473/delayed AU:ASX -0.60%   shares soared 22.5% in Sydney, while SGX /zigman2/quotes/206876763/delayed SG:S68 +0.67%   /zigman2/quotes/205167400/delayed SPXCY -0.57% slid 2.4% lower.

Under the deal, SGX Chief Executive Officer Magnus Böcker “is anticipated to become” CEO of the new entity, while ASX Chairman David Gonski would serve as deputy chairman, the SGX statement said. SGX chairman-elect Chew Choon Seng would be non-executive chairman, it said.

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“The combined exchange group, ASX-SGX Ltd., will have pro-forma revenues of approximately $1.1 billion and pro-forma earnings before interest and income tax of approximately $700 million” based on their results for the year ended June 30, in addition to a market capitalization of $12.3 billion as of Oct. 22, the last trading day preceding the announcement, SGX said.

Th deal takes the SGX-ASX duo’s market capitalization closer to that of the Hong Kong bourse, which is currently the world’s largest stock exchange by market capitalization. HKEx /zigman2/quotes/200234512/delayed HK:388 -0.64%   /zigman2/quotes/201215503/delayed HKXCY +0.63%  currently has a market value of 187.8 billion Hong Kong dollars (24.1 billion). Shares of HKEx were trading 3.3% higher after the deal was announced.

“We believe that the market will view an SGX-ASX combination as a defensive one, both being exchanges that have relatively mature organic domestic-growth opportunities and facing the prospect of losing effective monopoly status with rising pricing pressures as alternative exchanges and trading venues erode [market] share over time,” Citigroup analysts wrote in a report, before SGX confirmed details of the acquisition.

/zigman2/quotes/208455670/delayed
US : U.S.: OTC
$ 63.80
-0.72 -1.12%
Volume: 364.00
Dec. 1, 2021 3:56p
P/E Ratio
34.38
Dividend Yield
2.45%
Market Cap
$12.41 billion
Rev. per Employee
$1.02M
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/zigman2/quotes/205682473/delayed
AU : Australia: Sydney
$ 89.83
-0.54 -0.60%
Volume: 472,910
Dec. 2, 2021 4:10p
P/E Ratio
36.16
Dividend Yield
2.49%
Market Cap
$17.51 billion
Rev. per Employee
$1.37M
loading...
/zigman2/quotes/206876763/delayed
SG : Singapore: SGX
$ 9.07
+0.06 +0.67%
Volume: 2.09M
Dec. 2, 2021 5:10p
P/E Ratio
22.06
Dividend Yield
3.53%
Market Cap
$9.55 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/205167400/delayed
US : U.S.: OTC
$ 97.73
-0.56 -0.57%
Volume: 1,996
Dec. 1, 2021 3:20p
P/E Ratio
21.36
Dividend Yield
3.46%
Market Cap
$6.96 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/200234512/delayed
HK : Hong Kong
$ 432.00
-2.80 -0.64%
Volume: 4.61M
Dec. 2, 2021 4:08p
P/E Ratio
42.84
Dividend Yield
2.12%
Market Cap
$544.03 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/201215503/delayed
US : U.S.: OTC
$ 55.57
+0.35 +0.63%
Volume: 74,395
Dec. 1, 2021 3:48p
P/E Ratio
42.78
Dividend Yield
1.94%
Market Cap
$69.78 billion
Rev. per Employee
N/A
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Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau.

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