Australian Merger Will Create 'Leading Bourse' In Asia Pacific

by Mary Swire, Tax-News.com, Hong Kong

28 March 2006

Australian Stock Exchange Limited (ASX) and SFE Corporation Limited (the Sydney Futures Exchange or SFE), have unveiled a proposal to merge their businesses and create one of the leading financial markets exchanges in the Asia-Pacific region.

In a joint statement issued on Monday, the companies said that the merged group will be the ninth largest listed exchange group globally, and will represent "an important milestone in the development of Australia’s capital markets".

SFE Corp's subsidiary companies (Sydney Futures Exchange Limited, SFE Clearing Corporation Pty Ltd and Austraclear Limited) provide exchange-traded and over-the-counter financial services to institutions throughout the Asia-Pacific region and globally.

Under the terms of the proposed merger, to be effected by a scheme of arrangement, SFE shareholders will receive 0.51 ASX shares per SFE share. The proposal values SFE ordinary shares at A$16.93 (US$11.96).

Following the merger, ASX intends to undertake a capital management initiative distributing up to A$100 million in cash to all existing and new shareholders, subject to tax advice and any necessary approvals. This will exceed and supersede ASX’s previously announced A$50 million capital return.

The merger will be subject to approval from the Australian Competition and Consumer Commission and the Federal Treasurer, Peter Costello.

The current Chairman of ASX, Maurice Newman, will be Chairman of the combined group. Rick Holliday-Smith and two non-executive directors from SFE will join the Board of ASX.

Welcoming the merger, SFE’s Managing Director and CEO, Robert Elstone, observed that: “This is a great opportunity to enhance Australian capital markets, driving liquidity and market efficiencies to the benefit of all participants and shareholders.”

Meanwhile, Mr Newman argued that: “The logic supporting this initiative is compelling."

"The businesses uniquely complement each other. Combined, they create the leading, integrated financial markets exchange in the Asia-Pacific region, able to punch above its weight in the global capital markets. This merger will have significant benefits for both sets of shareholders and all market participants, and the time is now right," Mr Newman stated.

In recent years, 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% and 20%, respectively.

The merged company will be owned up to 40.2% by former SFE shareholders and 59.8% by existing ASX shareholders.

Based on current market values, the merged group would be valued at up to A$5.3 billion (US$3.74 billion), placing it around 50th in rank of the largest companies listed on ASX.

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