Singapore Exchange (SGX)

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So how will the deal be financed? Noted that SGX has S$753 million in cash as at Sep 30, 2010, and has very strong free cash flow generation capability. ASX is valued at about $5.9 billion, so SGX are about S$5.1 billion "short". I guess they could always gear up to buy ASX, or perhaps have some share swap arrangement, but will this benefit shareholders in the long-run? Huh

Oct 22, 2010
SGX, Australia ASX in talks

SYDNEY/SINGAPORE - THE Singapore Exchange is in takeover talks with Australia's ASX Ltd, a report said, in a deal which could create one of the world's largest exchanges with a market capitalisation of almost US$14 billion (S$18.2 billion).

Shares in the ASX and Singapore Exchange were both placed in a trading halt on Friday. The ASX said it was in talks with another party about a possible business combination but declined to elaborate.

The Singapore Stock Exchange was expected to make a full takeover bid for the ASX on Monday, The Australian newspaper said in a report on its website. It said UBS was advising ASX on the deal while Morgan Stanley was acting on behalf of the Singapore Exchange.

The ASX, which operates Asia's third-largest listed bourse, said last month it was in talks with other parties. 'A party has recently re-activated confidential discussions with ASX concerning a possible business combination,' its said in a statement, without giving more details.

The ASX has been looking at new business opportunities ahead of the end of its monopoly in 2011.

The Singapore Exchange has a market capitalisation of around $8 billion, while the ASX was valued at $5.9 billion at the close of trade in Sydney on Friday.

The ASX and other Asian exchanges are investing in new technology to counter the threat of 'dark pools', or alternative trading systems, and boosting their capacity to handle large trades while also lowering fees.

In March, the Australian government approved in principle a market licence for Europe's Chi-X Australia Pty Ltd, which is expected to begin operation in 2011. -- REUTERS

My Value Investing Blog:
My bet is that SGX will pay ASX shareholders primarily by swapping its new shares with only a small cash consideration.
Thereafter, the SGX-ASX entity will be dual listed in both exchanges, similar to Singtel-Optus arrangement.
from a value investing point i think SGX is a lousy candidate at current valuations (really excessive Tongue)

if we are talking about another aspect arbitrage, that's a different game altogether

warren buffett has written that there are times he made good market profits playing this game.

the trick in this case is to buy ASX which is the takeover target below the offer price by SGX. If the deal go through, you may make 'instant' profits which may be quite substantial percentage when the take over is effected. The high risk here is that if the deal fall apart ASX prices may drop significantly to a lower / original level

i hardly think a merged entity / company would always be a better co as the company may incur heavy debts after the takeover / merger event.

i think SGX would become the hot favorite among punters / traders / speculators / hedge funds whatever u name it for now lol
who could resist lure of 'instant' big profits - get rich quick (scams), hahaha Tongue
Business Times - 23 Oct 2010

SGX set to launch A$6b offer for ASX

Reports suggest takeover of Australian bourse could create a mega exchange with $18b market cap and a dual listing



SINGAPORE Exchange (SGX) could be on the verge of a historic takeover, with an estimated A$6 billion (S$7.65 billion) bid for Australia's ASX, reports suggest.

The move by SGX - which has been under the leadership of merger maestro Magnus Bocker for under a year - could create Asia's biggest exchange at a time when SGX is facing pressure to outshine Hong Kong, and establish itself as a strong commodities player in Asia.

Trading of shares of SGX and ASX was halted yesterday. While SGX had no comment on the deal, ASX said it was in discussions on a 'business combination'.

'A party has recently reactivated confidential discussions with the ASX concerning a possible business combination,' it said in a statement.

Before both trading halts - which have not been lifted - shares of ASX were up 2.52 per cent at A$34.96, while SGX shares dropped 2.7 per cent at $9.54, putting their market values at A$6.12 billion (S$7.81 billion) and S$10.2 billion respectively.

This works out to a combined market cap of $18 billion, or close to 60 per cent of Hong Kong Exchanges and Clearing's (market value at HK$187 billion (S$31.3 billion). But while the Singapore bourse is the bigger company, the Australian exchange runs a market that is almost twice as large (A$1.4 trillion) on account of mining heavyweights BHP Billiton and Rio Tinto, as well as Australia's big four banks.

According to The Australian, the merged company will be listed on both the Singapore and Australian stock exchanges, so as to fend the two bourse operators from any political backlash.

The Australian paper said that SGX's CEO Mr Bocker would take charge of the new entity, with ASX chairman David Gonski as deputy chairman. The proposal is expected to require approval from the Australian government.

Several analysts - who declined to be named - were surprised by the bid, noting that SGX had previously tried, but failed to draw stronger ties with Bursa Malaysia.

'Is a merger good? Definitely,' said a CIMB research report yesterday, noting ASX's heavy focus on commodities, with mining giants BHP Billiton and Rio Tinto listed there. On SGX's part, it has forged ties with the London Metal Exchange and expressed interest in drawing more commodity companies to list to Singapore.

'The greatest value of having closer cooperation with ASX is that it can propel SGX to become the Chicago of Asia,' CIMB said.

'SGX will never have the listing pipeline of HKex but if it builds a strong commodity hub, it can still be very relevant as an Asian financial centre in the upcoming Asia decade,' CIMB added.

SGX has only about half of its $753 million net cash in its first quarter of fiscal 2011 available for this purchase, with the remainder needed for regulatory capital.

'If acquisition is true, it would entail an SGX rights issue or placement,' CIMB said.

SGX CEO Mr Bocker had crafted the acquisition of several exchanges in the Baltic states and orchestrated the US$3.7 billion merger between OMX and Nasdaq in 2008.

His firm ties in the West, such as merging Nasdaq and OMX with current Nasdaq OMX CEO Robert Greifeld, followed him to Singapore, with both men unveiling a cross-listing agreement between SGX and Nasdaq OMX yesterday.

Mr Bocker has been eager for SGX to boost its liquidity, noting that its turnover velocity should hit 150 per cent, as seen in the European bourses, within five years. It now stands at about 60 per cent.

In a statement from outgoing SGX chairman JY Pillay in the latest annual report, Mr Pillay noted that in terms of consolidation among exchanges, 'the odds are greater that joint ventures and other cooperative moves will spread'.

'We remain open to whatever possibilities that may come our way,' he added.

ASX will lose its monopoly by 2011 as high-speed trading platform Chi-X Global enters the Australian market in March.

Chi-X Global has set up a dark pool with SGX, Chi-East, that would start trading some securities listed in Singapore, Hong Kong, Japan and Australia in Nov.

UBS was reported to be advising ASX on the deal while Morgan Stanley was acting on SGX's behalf. Both banks declined comment.

The last significant deal between the two countries involved Singapore Telecommunications acquiring control of telecommunications group Optus in 2001.

My Value Investing Blog:
if after merger, we retail trader can trade even cheaper costs, that will be gd news..but i dun think it benefit us anyway?
Quote:if after merger, we retail trader can trade even cheaper costs, that will be gd news..but i dun think it benefit us anyway?

I doubt the merger will really benefit investors. IMHO SGX is very poorly managed despite having a fantastic monopoly (maybe the two are related). There are some low-hanging fruits that would cost almost nothing to implement and have beneficial effects immediately. Yet the SGX is spending hundreds of millions of dollars on high frequency trading and now a merger.

For example, the minimum spread is 0.5cts. This automatically turns any stock trading at 10cts or less into a gambling chip because no sensible investor is going to enter a situation where he is automatically 10% down: buy up 0.5cts, sell down 0.5cts, total cost 1ct = 10%. HKSE has a minimum spread of 0.1ct.

Second, the minimum lot size of 1,000 shares. With scripless trading the lot size is meaningless. Yet the lot size makes stocks with high per-share values very difficult to buy. Try buying 1 lot of DBS, UOB, Jardine C&C, etc. And not everything trades with sufficient volume or a reasonable spread on the odd lot market. As a result many retail investors are shut out of the market. Yes, most volume ultimately comes from institutions, but the institutions also need to buy from and sell to the retail investor. ASX has a lot size of 1 share. Even KLSE has a 100 share lot size.

Third, the SGX website is unwieldy. The search engine is a joke, and the announcements page forces you to open one announcement at a time. The old website allowed multiple documents to be loaded at the same time which was a lot quicker. And documents are now kept for only 2 years before being shuffled off to the National Library (which itself also does not seem to allow electronic access). So information is hard to get. On HKSE I can get information going back 10 years.

In summary, the spread is too big, the lot size is too large, and the website stinks. The first two can be fixed at the stroke of a pen (rule change), and the last requires a bit of money (which SGX has a lot of) and some common sense/user perspective (which apparently nobody in the website department has).
agree..i also just recently realise i couldnt retrieve data stretched far back as 4-5 years ago..& is quite annoying

ya if u didnt said about scripless share trading now, i wont have realise it is quite senseless to have a min
of 1 lot = 1000 shares since it is electronic system now...and odd lot trading is quite expensive for small time investor like me..but then i also just discovered that there are still investors who like to keep share certificate to my surprise..i dunno why they like a paper share certificate at least that what i discovered while i was working in Hong Kong recently for some time and counting & verifying share a waste of time & resources.

and i want to add on that sgx-cdp could also have improved their share lending scheme. presently a retail investor needs to have at least 50 lots of the counter share before cdp will consider borrowing the shares from you. the 50 lots threshold have denied many long term holders of another avenue to lend their shares for some return.

another thing about HKeX edge over SGX is that they have fully automatic system for deal with corporate actions etc..i understand in hong kong a retail investor just needs to have a log-in id and password to perform corporate action like vote for AGM, accept rights, exercise warrants, apply ipo through their online CCASS account. corporate announcement can be sent through email to investor instead of hardcopy.

10 minutes after my previous posting (which i have somehow accidentally deleted), guess what, I just checked SGX's announcement page and they now have announcements going back to 5 years.

Hey D.O.G, maybe SGX is also working on your other two low hanging fruits right now.... there is hope for SGX afterall.

Personally I am excited about the prospects of a merger between SGX/ASX. If things worked out as intended, then its good for SGX and its good for my little stake in one of the listed brokers in Singapore.

ya.. I hate the javascript link in the announcement page.
They think that it is damn cool to have a pop-up window after the click but it sucks.

Even the page flipping is using javascript. SGX website is the ultimate bad example of using javascripts for web pages.

Besides that, you can't use the back button of the browser in any SGX web pages.
What happen when you use the back button? You will get the SGX's "Company All-In-One Info" web page. So brillant...... and instantly remind you of the company that brings you this junk website.

It is that difficult to do back button. Nay... Gmail did that long long ago....

wee Wrote:I just checked SGX's announcement page and they now have announcements going back to 5 years.

Indeed. I am very pleased. It is a great step forward. I foresee that I will be very busy downloading stuff this weekend.

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