Two of the major stock exchanges in the Asia-Pacific region, the Singapore Exchange Limited (SGX) and the Australian Securities Exchange Limited (ASX), are reported to be in merger talks, which if successful, would create one of the region's largest bourses with a market value of approximately $14 billion.
It is expected that SGX would make a full takeover bid for ASX on Monday, The Australian reported. Both the stock exchanges went into a trading halt yesterday.
In a communication to the nation's securities regulator Australian Securities and Investment Commission (ASIC), Amanda Harkness, group general counsel and company secretary of ASX requested a 2-day trading halt on its securities.
ASX further stated that the company does not have any information to disclose at this time, but observed an increase in its share price Friday.
ASX shares ended up 86 cents, at A$34.96 yesterday, registering an increase of 2.5 per cent.
''A party has recently re-activated confidential discussion with ASX concerning a possible business combination. ASX believes that the discussions remain confidential but in light of potential for speculation is concerned to manage its disclosure obligations,'' the statement said.
On comparison, SGX is larger with a market value of around $8 billion, while ASX has a value of approximately $6 billion. The Singapore exchange is trading at an earnings multiple of 27 times against the Australian counterpart's 17 times.
According to the Australian, the final details of the merger are still being worked out. However, it is expected that SGX will lead the combined entity with chairman and chief executive from its side, while ASX's current chairman David Gonske will become the deputy chairman.
Trading in ASX shares will resume on Tuesday, or before if an announcement is released to the market, according to an ASIC release.
ASX is gearing up to face competition from new players such as Chi-X which offers high-speed, low-cost alternative trading systems basically to institutional and accredited investors, and is expected to come live in 2011.
Observers also see the possibility of a takeover by SGX, lest the merger talks fail. A tie-up between the two exchanges was under speculation in recent months considering the geographic, time-zone and business model similarities between the two regional players.
The proposed combination is in line with the global trend towards consolidation between stock exchanges, in the likes of NYSE Euronext and Nasdaq OMX Group.
UBS is the advisor to ASX, while Morgan Stanley advises SGX on the transaction.
SGX is Asia-Pacific's first demutualised and integrated securities and derivatives exchange, and the first in the Asia-Pacific region to be listed through a public offer and private placement.
SGX holds 5-per cent stake in India's Bombay Stock Exchange, which it acquired in 2007.
Sydney-based ASX is Australia's leading stock market with activities spanning primary and secondary market services, and functions as a market operator, clearing house and payments system facilitator.
Meanwhile, in another development yesterday, SGX and NASDAQ OMX has extended their cooperation to bring American Depository Receipts (ADRs) on SGX's GlobalQuote, and also announced plans to offer companies dual listing on both the exchanges.