The US$8.4bn takeover offer is just that - a takeover, not a merger or tie-up - and while it would richly reward shareholders in the ASX, it is far from being a done deal
When national interest conflicts with global ambition, there are bound to be fireworks. The Singapore Exchange's proposed takeover of the Australian Stock Exchange (ASX) is no exception.
Since the US$8.4 billion (Dh30.85bn) bid was announced in October, there has been no let up in punditry over the consequences of the national bourse falling into foreign hands.
This is not a merger or a "tie-up" between bourses, which has been common in the past few years between European and US exchanges. This is a takeover, pure and simple, and a very sweet one for those holding ASX shares. Singapore is offering $48 a share - a 20 per cent premium on the current value of the ASX. The combined entity would be worth more than $14bn and would retain listings in Singapore and Australia.
The ASX badly wants the deal and, to counter fears, has been resorting to spin. Think of the synergies and the access to Asia, it argues. This is not a takeover but a "business combination", it enthuses.
Shares in the ASX have not been driven up as might be expected, because this is by no means a done deal. Singapore now has the consent of the Australian Competition and Consumer Commission but needs the go-ahead from the Foreign Investment Review Board, the Reserve Bank of Australia, and the chief regulator, the Australian Securities and Investments Commission. Even if it gets all these, the deal has to clear parliament, which will have to change laws that currently forbid a foreign entity from owning more than 15 per cent of the exchange.
The last hurdle will be the toughest. Singapore and the ASX will have to reassure those who believe that the ASX is selling off a national institution to the highest bidder.
The Australian Green Party - which holds the balance of power when passing legislation - says it "will not be facilitating or supporting this takeover".
Even the opposition conservatives have said the offer is "of great concern". The independent lawmaker Bob Katter, a deeply conservative voice whose views are said to represent middle Australia, calls the proposal "lunacy".
What is obvious is that to Singapore, price doesn't matter so much as control. While offering such a premium, the Singapore Exchange is going to have to get its money back somehow. It's half the size of the ASX and paying way above the odds. To claw back the cost of acquisition, listing rules may need to change and compliance could become more expensive, especially if companies have to pay listing fees on both exchanges.
Proponents point to the advantages of greater liquidity as the number of buyers and sellers is multiplied by the "combination". Then there's the easy access to all important Asian capital and the corporate synergies that can be forged in the mix. But while a bigger equities pool is one thing, how much will investors pay to swim in it?
The deal is also in both parties' interests. Singapore needs to strengthen its expertise in financial services while Australian institutional investors need a larger investment universe.
Australia now has a superannuation pool of about US$1 trillion, which is expected to grow to $5tn by 2030. Asset allocation is heavily skewed towards the biggest local companies, and comparatively little is invested in local bonds.
The more paranoid are suggesting that the global financial marketplace is on the verge of an Asian takeover of western financial interests. Asian governments are sitting on hundreds of billions of reserves and Asian companies are hoarding cash. The resultant shopping spree will shake up the global power balance as rarely before.
More likely, Singapore just needs scale to compete with Hong Kong, which is already said to be flirting with a Japanese exchange tie-up.
Either way, the real issue is ambition. Singapore is clearly prepared to spend big to get the economies of scale that it does not possess locally. There may be more of this dynamic in Asia - and who's to say it will simply be about controlling exchanges? One thing is for sure, the West needs to be prepared for a merger and acquisitions spree from hitherto unlikely quarters.
business@thenational.ae
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The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
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Three trading apps to try
Sharad Nair recommends three investment apps for UAE residents:
- For beginners or people who want to start investing with limited capital, Mr Nair suggests eToro. “The low fees and low minimum balance requirements make the platform more accessible,” he says. “The user interface is straightforward to understand and operate, while its social element may help ease beginners into the idea of investing money by looking to a virtual community.”
- If you’re an experienced investor, and have $10,000 or more to invest, consider Saxo Bank. “Saxo Bank offers a more comprehensive trading platform with advanced features and insight for more experienced users. It offers a more personalised approach to opening and operating an account on their platform,” he says.
- Finally, StashAway could work for those who want a hands-off approach to their investing. “It removes one of the biggest challenges for novice traders: picking the securities in their portfolio,” Mr Nair says. “A goal-based approach or view towards investing can help motivate residents who may usually shy away from investment platforms.”
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
Which honey takes your fancy?
Al Ghaf Honey
The Al Ghaf tree is a local desert tree which bears the harsh summers with drought and high temperatures. From the rich flowers, bees that pollinate this tree can produce delicious red colour honey in June and July each year
Sidr Honey
The Sidr tree is an evergreen tree with long and strong forked branches. The blossom from this tree is called Yabyab, which provides rich food for bees to produce honey in October and November. This honey is the most expensive, but tastiest
Samar Honey
The Samar tree trunk, leaves and blossom contains Barm which is the secret of healing. You can enjoy the best types of honey from this tree every year in May and June. It is an historical witness to the life of the Emirati nation which represents the harsh desert and mountain environments
Company profile
Company name: Suraasa
Started: 2018
Founders: Rishabh Khanna, Ankit Khanna and Sahil Makker
Based: India, UAE and the UK
Industry: EdTech
Initial investment: More than $200,000 in seed funding
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Bombshell
Director: Jay Roach
Stars: Nicole Kidman, Charlize Theron, Margot Robbie
Four out of five stars
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