This article is from the Australian Property Journal archive
The Australian Stock Exchange and Sydney Futures Exchange have agreed to a $5.3 billion merger to form the ninth largest listed exchange group in the world.
The merged group will also be listed around 50th in rank of the largest companies listed on ASX.
Under the terms of the proposed merger, SFE shareholders will receive 0.51 ASX shares per SFE share, valuing SFE ordinary shares at $16.93, a 25% premium to the volume weighted average SFE share price for the period March 10 to March 21.
The offer values SFE at $2.29 billion.
SFE chairman Rick Holliday-Smith said a merger with the ASX on the terms proposed is a logical progression and is supported by the SFE Board.
ASX chairman Maurice Newman AC said the merger will create the leading, integrated financial markets exchange in the Asia-Pacific region.
SFE managing director Robert Elstone said the merger is a great opportunity to enhance Australian capital markets.
ASX managing director Tony D’Aloisio said this is a strategic merger which will deliver a broader range of product, deeper management expertise and greater financial scale.
The Australian financial markets have grown strongly. Between 2002 and 2005 the level of trading activity on ASX and SFE grew at a compound annual rate of 21%2 and 20%, respectively.
The merged company will be owned up to 40.2% by former SFE shareholders and 59.8% by existing ASX shareholders.
In the meantime, the implication of the merger on the indexes and futures contracts, which is the S&P/ASX 200 Property Trusts Index and the SFE LPT Futures, which is based on the Dow Jones Australian LPT Index, have not been worked out.
The Dow Jones LPT Index is as a stand alone index with a market capitalisation of $88 billion, across 16 components.
Unlike, the Property Trust which is a subsector of the S&P/ASX 200 Index.
The market capitalisation of S&P/ASX 200 Property Trust Index is approximately $45 billion, across 27 trusts, with a turnover of around $50 million per day.
The sector currently represents around 6% of the market capitalisation of the All Ordinaries Index.
According to the ASX, Australian LPTs currently make up 12% of the world’s listed real estate assets.
SFE senior equities analyst Effie Tsiaousis said how the merger will affect the index and futures contracts will be worked out at the end of August 2006.
ASX’s national manager of corporate relations Gervase Greene said it is currently too early to assume what will happen with the indexes.
He added that the merger will not be a big bang but rather a slow integration of the businesses.
“At this stage, the indexes will continue to trade on the separate exchanges, and the integration committee and management will work on amalgamating the businesses,” Greene added.
Under the proposal, Newman will be chairman of the combined group, while ASX managing director Tony D’Aloisio will become its managing director.
Holliday-Smith and two non-executive directors from SFE will join the board of ASX, with key SFE executives also to be retained.
SFE managing director Robert Elstone will continue in his role until completion of the merger.
Following the merger, ASX also plans to return up to $100 million in cash to all existing and new shareholders – exceeding and superseding the ASX’s previously announced $50 million capital return.
The proposed merger is now under the review by the Australian Competition and Consumer Commission.
The ACCC said it is so far, the deal does not raise competition concerns.
The board of SFE has unanimously recommended that all SFE shareholders support and accept the merger proposal, in the absence of a superior proposal.
“Board members intend to vote in favour of the proposal,” SFE said in a statement.
By Adam Parsons with Nelson Yap
