Stars finally align for SFE and ASX after seven years

On the back of increased consolidation by exchanges worldwide the Australian Stock Exchange (ASX) has gained both ACCC and Sydney Futures Exchange (SFE) board approval for an acquisition of the futures exchange.

“Events have moved on. With what’s been going on internationally it’s quite clear there is consolidation taking place – I think the New York Exchange is looking to do something similar – The world has moved on,” Maurice Newman, ASX chairman, said. “For the past seven years we’ve been aware of the attractions of a merger but the stars haven’t been aligned. The stars are now aligned.” The ASX’s bid for the SFE in 1999 did not receive approval from the ACCC and is understood to have caused much acrimony between the two parties. Reports of merger talks have emerged intermittently since then but have usually been quashed by the SFE. The ASX approached the ACCC in January and the SFE on March 10, 2006, after receiving the regulator’s approval. The proposal has the unanimous recommendation of the SFE board and due diligence will be conducted over the next few weeks. Under the proposal, to be effected by a scheme of arrangement, SFE shareholders will receive 0.51 ASX shares per SFE share. The proposal values SFE shares at $16.93 or a 25 per cent premium to the volume weighted average SFE share price for the period March 10 to March 21. SFE shareholders could also choose to receive $2.58 cash per share plus a variable ratio of ASX shares per SFE share to a value equivalent to the all scrip proposal immediately prior to the scheme meeting. Tony D’Aloisio, current ASX managing director and chief executive officer, will head up the new organisation and Robert Elstone, SFE managing director and chief executive officer, will continue in that position until an expected completion date of July/August. The merged organisation will continue to operate under the ASX moniker but will retain SFE as a division name. Although the ASX considered launching its own futures business – it has a few small futures contracts – Newman said it was easier to acquire a business with an established clientele rather than trying to attract customers away from a business that was performing extremely well.