Daily ShareChat: ASX takeover

Singapore Exchange's implied $A8.4 billion ($NZ10.9 billion) part cash, part scrip takeover offer for Australia's ASX is still at an early stage and has a long way to go before becoming a done deal, says David Walker at Aegis Equities Research, which is owned by Morningstar.

The bid represents a 37.3% premium to ASX's pre-bid share price.

“The merits of the deal for ASX shareholders depend on the likelihood of strong long-term economic growth across the Asia-Pacific region,” Walker says.

“The two exchanges are pushing the growth story hard in order to justify their proposed merger.”

The long-term growth outlook for the region is “compelling” and a combined regional exchange makes strategic sense, Walker says. “But a number of issues need to be addressed, not the least being national interest concerns as the Australian securities market would be operated by the Singapore Exchange,” he says.

Advantages of the takeover include creating an exchange with greater global scale and relevance – the merged entity would be one of the major exchanges in the Asia Pacific region – and access to Asia Pacific's largest institutional investor base, he says.

Disadvantages include Australian shareholders wouldn't receive franking credits on their SGX shares, increased risk due to SGX using debt to partly fund the acquisition, loss of board control with ASX getting only four out of 15 directors and the Singaporean government's 24% stake in SGX.

Recommendation: Hold (under review).

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