ASX - SGX Merger Announcement

Aussie stockmarket, Australian Securities Exchange (ASX:ASX) have announced a merger with the Singapore stock exchange (SGX) on Monday, igniting the share price, closing at $41.75, adding $6.79 or 19.4 percent higher after the trading halt. This merger is a foreign takeover of what is currently our monopoly equities and derivatives trading platform.

The new CEO of the Singapore Exchange, Magnus Bocker made a $8.3 billion bid for the Sydney-based ASX at 37 percent premium. The Singapore and Australian connection can give benefits to both exchanges: Singapore has been losing China-related listing businesses to Hong Kong. Australia struggles to benefit from the Asia boom as it is culturally and physically remote. Together they offer investors access to 2,700 companies from 20-plus countries, and the world’s second-largest grouping of resources stocks.

However, few synergies can be seen from the merger deal between the ASX and the SGX. The companies aren't merging their stockmarkets, so the combined entity still needs to operate two order books and matching systems. The two stock exchanges operate a common technology platform eases integration. The cost savings will be perhaps only be $30 million a year. Capitalise that and the net present value is maybe $300 million which presents only a tiny fraction of the $2.2 billion premium the SGX is offering.