ASX and SGX merger marks Asia-Pacific's first major consolidation of exchanges

With the pro forma market capitalisation of the combined group pegged at around US$12.3 billion as of 22 October, the combined group is expected to have an increased weight in selected benchmark indices and will have added visibility among institutional investors globally.

ASX Limited (ASX) and Singapore Exchange (SGX) today announced that they have entered into a merger implementation agreement to combine to enable customers globally to capitalise on listing, trading, clearing and settlement opportunities created through the expanded platforms.

This combination will bring together the complementary businesses of two successful exchanges in the Asian time zone, with internationally recognised regulatory standards. The combination leverages the strengths of ASX through its listings, stock options and fixed income franchises, with SGX, the Asian gateway for international listings, equity futures and OTC clearing, to create the region’s pre-eminent exchange group.

The combined group will augment Australia’s financial market and funds management industry through direct participation in Asian growth, and increase ASX’s and SGX’s competitiveness in a changing global markets landscape. As proven platforms for raising capital and managing price risk for the resource sector, ASX and SGX will build on existing distribution and clearing capabilities, and intend to play an important role in establishing price discovery for global commodities in Asia Pacific.

The combined exchange group, ASX-SGX Limited, will have pro forma revenues of approximately US$1.1 billion and pro forma earnings before interest and income tax of approximately US$700 million, based on the audited financial statements of ASX and SGX, each for the financial year ended 30 June 2010 (“FY2010”).

While ASX and SGX currently achieve a high level of operational efficiency, pre-tax cost synergies and other transaction-related cost savings - comprising IT and non-IT related savings - are estimated to be US$30 million annually based on existing cost structures.

Together ASX and SGX will offer access to:

• second largest listing venue in Asia Pacific with over 2,700 listed companies from over 20
countries, including over 200 listings from Greater China;

• world’s second largest cluster of companies in the resource sector (more than 900 listings), the largest REITs sector (over 80 listings) and the largest number of ETFs (over 100) in Asia Pacific;

• world’s widest range of Asia Pacific equity, fixed income and commodity derivatives with over 400 contracts from over 10 countries, including Australia, Greater China, India and Japan, and covering a range of commodities including metals, energy and agricultural products;

• Asia Pacific’s largest and the world’s second largest base of institutional investors with combined assets under management of over US$2.3 trillion from existing superannuation, institutional and sovereign wealth funds;

• global distribution network with over 90 securities market participant firms and over 170 derivatives market participant firms on a combined basis; and

•leading exchange technology, including the proposed introduction of the world’s fastest trading platform with the lowest trading latency, and flexible data and connectivity solutions.

ASX and SGX will remain separate legal and locally regulated entities, and will maintain their existing brands. This will allow the two exchanges to maintain their existing iconic identities, which are well established in their home markets and internationally, while enabling customers to benefit from cross-market synergies and the greater scale, diversity and broader expertise of the combined group.

The combination of ASX and SGX will diversify the product and customer bases of the two exchanges and create cross-access opportunities for market participant firms. Listed companies will benefit from the increased profile of the listing platform among the global investing community and be able to benefit from an enlarged liquidity pool of investable funds.

ASX-SGX Limited will be the holding company of the combined group and will be listed on both the Singaporean and Australian exchanges. SGX will submit an application to ASIC for the listing and quotation of SGX shares on ASX, as CHESS Depository Interests (CDIs), being units of beneficial ownership in SGX shares.

Subject to regulatory approval, the combined group will have an international board comprising fifteen directors from five countries, including four directors drawn from ASX. The directors from ASX will be David Gonski AC, Russell Aboud, Jillian Broadbent AO and Alan Cameron AM, the current Chairman of the Board of Directors of ASX Compliance Pty Ltd.

Chew Choon Seng, currently the Chairman-elect of SGX, is anticipated to become the non-executive Chairman of the combined group. David Gonski AC, currently the Chairman of ASX, is anticipated to become the Deputy Chairman of the combined group. Magnus Böcker, currently the Chief Executive Officer of SGX, is anticipated to become the Chief Executive Officer of the combined group. Peter Hiom, the current Deputy Chief Executive Officer of ASX, is anticipated to become the Chief Executive Officer of the ASX business of the combined group.

David Gonski AC will remain as the Chairman of the local ASX Board, which will comprise a majority of Australian resident directors currently serving as ASX directors. It is the intention of the parties that these arrangements will be ongoing. The ASX Board will provide governance oversight of all Australian licensed operating entities of the combined group.

Subject to regulatory approval, an intermediate holding company will be created for all the Singapore licensed operating entities of the combined group, which will have a board comprising representatives from the ASX-SGX Limited Board.

J Y Pillay, Chairman of SGX, commented: “We are privileged to partner ASX, which brings to SGX a strong brand, an established business franchise and enriched capabilities. This will be a highly competitive exchange group in an increasingly globalised world.”

David Gonski AC, Chairman of ASX, said: “I am delighted to recommend this combination in the knowledge that it presents the opportunity for ASX to play its part in positioning Australia for growth within the region; and at the same time providing its ongoing role for Australian corporate governance and listed company oversight.

Magnus Böcker, Chief Executive Officer of SGX, commented: “The combination of ASX and SGX, offering innovative new products and services to the market, will allow customers to maximise future opportunities, where Asia Pacific takes centre stage globally as the source for capital, wealth creation and trading opportunities.”

Robert Elstone, Managing Director and CEO of ASX, said: “In a period of profound structural change in financial markets, ASX has carefully considered its strategic options to enhance its future competitiveness. This combination delivers tangible value today and presents the opportunity for shareholders, customers, employees and other stakeholders to participate in the growth options that this broader based exchange group can make available in the future, whilst preserving strong governance and regulatory oversight in Australia.”