The Australian Stock Exchange (ASX) and the Sydney Futures Exchange (SFE) announced plans to merge yesterday in a move that will create the world's ninth-largest listed exchange group.
The pair said the merger, which will create a leading financial markets exchange in the Asia-Pacific region, will be done on the basis of 0.51 shares in ASX being equal to each SFE share.
The deal values SFE at A$2.29 billion (US$1.63 billion) or A$16.93 per share, representing a 25 percent premium to the SFE share price for the period March 10-21.
SFE shareholders are also being offered an alternative of A$2.58 cash per share plus a variable ratio of ASX shares.
Cash return
Following the merger, ASX intends to return up to A$100 million in cash to shareholders through a capital management program.
The proposed merger, to be effected by a scheme of arrangement, will create a group valued at more than A$5.3 billion, ranking it around number 50 in the top listed companies on the ASX.
"It will be the ninth-largest listed exchange group globally and represents an important milestone in the development of Australia's capital markets," the exchanges said.
Both companies' stock rose sharply on news of the merger, with SFE jumping A$2.78 or nearly 20 percent to A$16.90 by 12:20pm yesterday and ASX rising A$1.13 or 3.47 percent to A$33.73.
The overall market was 0.6 percent higher.
ASX chairman Maurice Newman said the merger would have significant benefits for both sets of shareholders and all market participants, driving liquidity and market efficiencies.
"The businesses uniquely complement each other," he said.
"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," he said.
SFE chairman Rick Holliday-Smith said the proposed merger was "a logical progression" for the company and was supported by the SFE board.
ASX said it expected the deal to be earnings positive from 2008.
Management
Newman will be chairman of the combined group, while ASX managing director Tony D'Aloisio will become its managing director.
The merged group will be owned up to 40.2 percent by former SFE shareholders and 59.8 percent by existing ASX shareholders.
The deal is expected to deliver cost synergies in the order of A$14 million to A$18 million in the year to June 2008, ASX said.
The Australian Competition and Consumer Commission has formed a preliminary view that the deal does not raise competition concerns, the companies said.
The merger follows strong growth in Australia's financial markets.
Between 2002 and last year the level of trading activity on the ASX and SFE grew at a compound annual rate of 21 percent and 22 percent respectively.
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