Singapore Exchange has finally walked away from its proposed $8 billion bid for Australian Stock Exchange Ltd, after the Gillard Government formally knocked back the takeover.
Treasurer Wayne Swan said he rejected the proposed cross border exchange merger arguing it was not in the national interest.
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“In these circumstances the parties have agreed to terminate the Merger Implementation Agreement entered into on 25 October 2010,” ASX said in a statement.
The Australian exchange operator said it was now focused on finding a successor to chief executive Robert Elstone, who has signalled his intention to retire in July.
“ASX also continues to strengthen its preparedness to operate within the proposed domestic competitive environment, which will include the offering of new products and services to its customers and new market operators,” ASX said.
ASX shares were recently down 8 cents, or 0.2 per cent, to $33.40.
Singapore Exchange says it will continue to pursue organic and other strategic growth opportunities and will pursue further dialogue with Australian exchange ASX on other forms of cooperation, it said in a statement.
“SGX, as the Asian Gateway, is well-positioned to leverage on opportunities within Asia’s vibrant and dynamic economies,” said SGX.
“As Asia’s most international exchange, we will continue to pursue organic as well as other strategic growth opportunities, including further dialogue with ASX on other forms of co-operation.”
The Foreign Investment Review Board on Tuesday raised concerns about the proposed deal, arguing it was not in the national interest.
“After a long and careful consideration and consultation, I have today made orders under the Foreign Acquisitions and Takeovers Act to prohibit the proposal by Singapore Exchange to acquire ASX Ltd on national interest grounds,” Mr Swan said.
Mr Swan said government policy was to welcome foreign investment when it was in the national interest and no proposal had been rejected since 2001.
Since Labor came to government, more than 99 per cent of applications had been approved without conditions.
He said he took his responsibility as treasurer very seriously and his job was to protect the national interest.
‘‘In making my decision I have drawn on a broad range of market perspectives from a wide range of sources,’’ he told reporters.
‘‘My decision to disallow the proposal was based on clear, unambiguous and unanimous advice from the Foreign Investment Review Board that this takeover would be contrary to out national interest.’’
Mr Swan said it was his job to consider the matter in the national interest.
‘‘(And) it’s in Australia’s national interest to ensure the on-going strength and stability of our financial system,’’ he said.
The treasurer said the takeover would not maximise the benefits of the national superannuation pool and Australia’s reputation as a regional financial services centre.
Mr Swan said the deal would have been unlikely to give Australian-listed companies better access to Asian capital markets.
‘‘Let’s be clear here: this is not a merger. It’s a takeover that would see Australia’s financial sector become a subsidiary to a competitor in Asia,’’ the treasurer said.
‘‘It was a no-brainer that this deal is not in Australia’s national interest.’’
Mr Swan said the SGX was a relatively smaller regional exchange based on the number of companies listed and the value of those listings.
‘‘The deal would not provide a gateway to Asian capital flows as SGX has limited flows to the rest of Asia,’’ he said.
Mr Swan was reluctant to comment about the possibility of the Singapore exchange returning with a different offer.
‘‘I’ve outlined my reasons for rejecting the application,’’ he said.‘‘
I can’t speculate about a future application from the SGX or anybody else and I don’t intend to do that.’’
Mr Swan said under the takeover the ASX would have become a junior partner and there was no clear evidence the deal would have enhanced its operation.
‘‘Becoming a junior partner to a smaller regional exchange through this deal would risk us losing many of our financial sector jobs,’’ he said.
Jobs at risk
Mr Swan said the proposed takeover would have risked jobs and capital moving to Singapore and he would not stand by and let that happen.
‘‘At the end of the day this takeover was more about growing Singapore’s financial sector than Australia’s.
‘‘The deal just doesn’t stack up whatever yardstick you use.’’
Mr Swan said he received strong advice that ceding regulatory control of financial infrastructure critically important for orderly and stable capital markets would raise serious risk to the stability of Australia’s financial system.
He’s asked the Council of Financial Regulators to look carefully at measures which could be introduced to ensure continued protection of Australian issuers, investors and market participants in the event of any future merger.
‘‘It is absolutely critical that we take these steps now to put in place any reforms needed to protect our financial system stability should the ASX find a deal that is right for Australia,’’ he said.
The treasurer said it would have been very difficult to ignore advice against the merger.
‘‘I’ve gotta say I was frankly surprised how strong it (the FIRB) was in its advice to me to reject the application,’’ Mr Swan said.
‘‘I couldn’t stand here as treasurer and approve an application … which was advised against by every single regulator I’m responsible for.’’