Brokers get wind up as Aussies plot sneaky takeover of remade NZSE

Friday 30th March 2001

ATTRACTIVE TARGET: Former NZSE chairman Eion Edgar is sure the ASX and others would like to get their hands on the NZSE

By Nicholas Bryant

Stock Exchange members are pushing for tight restrictions on foreign ownership of their demutualised exchange in a bid to repel invading Australians.

Legislation before Parliament to allow for demutualisation makes no mention of ownership restrictions, other than to "authorise the members of the NZSE to determine their ownership entitlements in the NZSE."

And despite portraying our exchange as of minimal value to it throughout failed merger talks, the Australian Stock Exchange has hinted it is keen on the NZSE - not as a partner but as an acquisition, market analysts say.

Guests at a business lunch in Sydney last week, who were addressed by ASX chairman Richard Humphry, said loose ownership restrictions being placed on a demutualised NZSE would make it an attractive target for the ASX.

"Richard's tune had changed and what stunned everybody at the lunch was that it wasn't an issue of the ASX having written the merger off - it had just decided that commercially it was better to let the demutualisation process go through and readdress it when it was dealing with a commercial entity rather than a mutual society," one source said.

"Reading between the lines, it would be very much simpler for the ASX to swoop on a listed NZSE once it's been cleaned up," another said.

But the NZSE's board and members say they are ready for any Aussie assault.

"I'm sure [the ASX] would like to [acquire the NZSE] - they're not the only party either," NZSE board member and former chairman Eion Edgar said. He suggested banks, insurance companies and other financial service providers could also be interested.

He added that all exchanges the NZSE had researched had an ownership cap of some description, but there were a number of options available to it.

"Any cap could be seen as a reduction in value, though the politicians are likely to require one, but we haven't determined whether that's the best way to do it.

"It may be decided it's better to have a Kiwi share, or what's known as the Reuters model, with separate trustees who have the final say as to what's good for the future of the industry in New Zealand," Mr Edgar said.

But stopping the Australians from targeting our cheap, newly listed Stock Exchange post-demutualisation is on the minds of brokers such as Greenslades chief executive Roy Borgman.

"We would like to see a cap put on overseas ownership of the NZSE to ensure debate can take place before local control is relinquished.

"The loss of control by New Zealanders may ultimately not be an issue but informed debate is essential before that can occur," Mr Borgman said.

ASX spokesman Gervase Greene maintained the ASX had no firm plans on any possible merger, alliance or takeover of the NZSE at this stage.

For the NZSE to be transformed from a broker-owned mutual society into a limited liability company, it needs the smooth passage of the NZSE Restructuring Bill. The bill has had its first reading and submissions on it are being accepted by Parliament's finance and expenditure select committee.

Mr Greene said the ASX had not considered whether to make a submission to the select committee.

Before demutualisation can occur, it must receive 75% support from NZSE members.

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