A RISE in economic nationalism has claimed its first scalp in the global stock exchange merger wave, with the Singapore Stock Exchange sent back to the drawing board to come up with a more equal proposal to save its $8.4 billion deal with the Australian Securities Exchange.
The dollar fell sharply after the news that the deal would be rejected and last night was trading just above US103¢ amid concerns over the signals the decision sent about foreign investment in Australia.
The move has raised questions about the ability of foreign takeovers to win the approval of the minority Gillard government in the face of rising economic nationalism.
The chief executive of SGX, Magnus Bocker, expressed surprise at the rejection of the deal by the Treasurer, Wayne Swan, particularly as it came only weeks after SGX applied to Treasury for the proposed takeover.
Mr Bocker said SGX was pushing ahead with the ASX proposal until it obtained a final ruling within the next few days, but at this stage it was not planning to change any details.
”When the final decision comes, we will see what that is and what the next step will be,” he said. For its part the ASX remains keen on pursuing a merger with a global partner, either with or without SGX.
”The ASX board maintains anongoing belief in the need for ASX participation in regional and global exchange consolidation,” ASX said.
ASX shares dropped immediately on the statement – falling as much as 4 per cent – and closed $1.15, or 3.3 per cent, lower at $33.70. This was well down from the $41.75 peak when the bid was revealed in October. In Singapore SGX shares rallied 6.4 per cent to $S8.52.
”The decision is disappointing but not surprising,” said John Sevior, the head of equities at Perpetual.
The politics of the deal had made it hard for the transaction to win approval, he said.
”When you hear talk about national sovereignty and national interest, clearly that’s a factor,” he said.
Investment bankers who worked for six months on the deal and were denied a success fee were furious. A senior adviser said: ”It is no wonder that Australia is now considered a less favourable investment environment than it was three years ago.”
The ASX and SGX are now free to find another dance partner but bankers were fearful the Treasurer’s decision would send a clear signal to interested parties that they were not welcome.
The ASX has signalled it is still keen to participate in global consolidation, with or without the SGX.
The rejection comes amid rising concern among governments around the world about foreign investment, with Australia now likely to be seen by many as taking a stronger protectionist bent, given the Gillard government’s reliance on independents and minority parties.
David Friedlander of Mallesons Stephen Jaques said SGX was rejected because it was not the best choice of partner.
”I think the truth is that if it was Hong Kong or Shanghai knocking at the door, it would’ve been a pretty different result,” he said.
”It’s not an anti-foreign investment thing. It’s more a decision about where Australia’s growth is linked to in the years ahead, and Singapore is seen as an equal and not a destination that will move Australia forward in the same way.
”If you look at mergers in global securities exchanges now, it’s a mishmash. Maybe this is just a sensible decision about trying to get a more orchestrated piece of where ASX should sit in the Asian puzzle.”