SYDNEY: Australian bourse operator ASX and suitor Singapore Exchange are reviewing board arrangements for their planned $7.9 billion tie-up to overcome political hurdles amid a wave of stock exchange consolidation globally, according to Reuters on Tuesday, Feb 15.
Nationalism is the one of the biggest hurdles to a string of transatlantic mergers announced in the past week which face intense scrutiny from regulators and politicians on both sides of the Atlantic as exchanges are often seen as symbols of national pride.
Similarly, Singapore's deal to take over the ASX has also been held up as Australian lawmakers, whose approval is necessary for a deal, are wary of Singapore controlling the local bourse.
The ASX said Tuesday it was in talks with SGX about changes to governance arrangements, fuelling speculation that Singapore may be willing to relinquish some additional board seats in the combined entity to overcome political opposition to the deal.
"The other exchange mergers that have been announced recently have been touted as a merger of equals. But this is a takeover, and changing the pitch to make it a merger of equals will get a lot more buy-in in government circles," said Shane Delphine, Investment Manager at Karara Capital.
A wave of consolidation at stock exchanges globally has thrown the spotlight on Asia's bourses and sparked a rally in ASX shares last week on expectations the deal now had a greater chance of overcoming political hurdles.
Deutsche Boerse announced last week it was in talks to buy NYSE Euronext , while the London Stock Exchange has agreed to buy Canadian market operator TMX .
ASX and SGX shares were both placed in a trading halts on Tuesday pending an announcement.
The deal needs the support of the Australian government, which sources and local media say wants the ASX to have greater board representation in the merged group. It also needs approval from Australia's parliament, where the ruling Labor party is in a minority so an agreement will need to win support on both sides of the aisle.
Under the current proposal, the chairman and chief executive of the combined group with come from SGX. The ASX would provide 4 of the 15 directors.
"Clearly Singapore does want to take control of ASX, it's not a merger of equals, and yet there's this political dynamic that suggests the deal structure has to change," Delphine said.
ASX requested the trading halt for two days or until the company requests the halt be lifted. The exchange is scheduled to release half-year results on Feb. 17.
SGX Chief Executive Magnus Bocker said last week the consolidation globally underscored the rationale for a tie-up with the ASX. He said the companies were preparing a submission to Australia's Foreign Investment Review Board (FIRB).
Australia's opposition has expressed concern about the deal but stopped short of outright rejection. Informal talks between politicians and representatives from the exchanges have been carrying on behind the scenes for some time, sources have said.
Political backing is crucial as Australia's parliament needs to lift ASX's 15 percent cap on any single shareholder for a deal to go through.
Other exchanges have said they were considering striking their own deals or looking to take advantage of the distraction, in early signs of ripples through the world's capital markets. Both Deutsche Boerse and the LSE face a tangle of regulatory and political hurdles. - Reuters
Nationalism is the one of the biggest hurdles to a string of transatlantic mergers announced in the past week which face intense scrutiny from regulators and politicians on both sides of the Atlantic as exchanges are often seen as symbols of national pride.
Similarly, Singapore's deal to take over the ASX has also been held up as Australian lawmakers, whose approval is necessary for a deal, are wary of Singapore controlling the local bourse.
The ASX said Tuesday it was in talks with SGX about changes to governance arrangements, fuelling speculation that Singapore may be willing to relinquish some additional board seats in the combined entity to overcome political opposition to the deal.
"The other exchange mergers that have been announced recently have been touted as a merger of equals. But this is a takeover, and changing the pitch to make it a merger of equals will get a lot more buy-in in government circles," said Shane Delphine, Investment Manager at Karara Capital.
A wave of consolidation at stock exchanges globally has thrown the spotlight on Asia's bourses and sparked a rally in ASX shares last week on expectations the deal now had a greater chance of overcoming political hurdles.
Deutsche Boerse announced last week it was in talks to buy NYSE Euronext , while the London Stock Exchange has agreed to buy Canadian market operator TMX .
ASX and SGX shares were both placed in a trading halts on Tuesday pending an announcement.
The deal needs the support of the Australian government, which sources and local media say wants the ASX to have greater board representation in the merged group. It also needs approval from Australia's parliament, where the ruling Labor party is in a minority so an agreement will need to win support on both sides of the aisle.
Under the current proposal, the chairman and chief executive of the combined group with come from SGX. The ASX would provide 4 of the 15 directors.
"Clearly Singapore does want to take control of ASX, it's not a merger of equals, and yet there's this political dynamic that suggests the deal structure has to change," Delphine said.
ASX requested the trading halt for two days or until the company requests the halt be lifted. The exchange is scheduled to release half-year results on Feb. 17.
SGX Chief Executive Magnus Bocker said last week the consolidation globally underscored the rationale for a tie-up with the ASX. He said the companies were preparing a submission to Australia's Foreign Investment Review Board (FIRB).
Australia's opposition has expressed concern about the deal but stopped short of outright rejection. Informal talks between politicians and representatives from the exchanges have been carrying on behind the scenes for some time, sources have said.
Political backing is crucial as Australia's parliament needs to lift ASX's 15 percent cap on any single shareholder for a deal to go through.
Other exchanges have said they were considering striking their own deals or looking to take advantage of the distraction, in early signs of ripples through the world's capital markets. Both Deutsche Boerse and the LSE face a tangle of regulatory and political hurdles. - Reuters
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