Just last week, I heard that the Singapore Exchange (SGX) is looking to tie up with the Australian exchange ASX Ltd. Now I heard that’s SGX will take over the Sydney-based exchange in a deal worth A$8.4 billion ($8.3 billion).
Now a merger between SGX and ASX will create the fifth-largest listed exchange in the world, so on paper this looks like a good deal. Shares in ASX jumped up 25% once news spread, however the news is less great for SGX shareholders.
SGX shares fell as much as 6.7% before recovering some of the losses. The reason is simple; ASX will lose its monopoly in Australia next year when a new exchange, Europe's Chi-X Australia Pty Ltd, will start operations.
So the question being asked in Singapore is why is the SGX paying $8.3 billion for an exchange that is going to lose market share next year?
I also have that question, the price do seem a little high to me, but at the same time I can see why SGX did this. SGX and ASX are the second and third largest listed bourses in Asia and both have been around for awhile, so on several levels this merger make sense. As for the price…time will tell if it is a good price.