By online business reporter Michael Janda
The proposed merger between the ASX and Singapore's
stock exchange is already under threat after a wide range of
non-Labor MPs expressed opposition to the deal.
The planned tie-up must not only be reviewed by several
regulatory agencies, but will also need to be approved by the
Federal Government and the finely balanced Australian
Parliament.
Independent MP Bob Katter was quick in declaring his opposition
to the merger.
"I intend - I'm determined - to tenaciously oppose it, and I
expect that all of the crossbenchers, every single one of us on the
crossbenches, will be doing the same thing," he said.
Greens leader Bob Brown also came out against the planned deal,
citing the Singaporean government's significant stake in the stock
exchange, and the nation's poor human rights record as reasons to
reject the merger.
"The Singapore government put the phone down and hung Nguyen Van
with no further compassion or consideration of Australia's
opposition to the death penalty," he told reporters.
"Now the phone's ringing in the opposite direction to have the
Singapore stock exchange - with a 15 per cent government interest,
I might add - take over the Australian Stock Exchange in Sydney. We
should tell them, 'nothing doing'."
The two exchanges have done substantial work to get the deal to
this stage, but comments from senior Coalition politicians show
they may be facing their toughest hurdle: securing the votes they
will need to have the merger approved by the Federal
Parliament.
The Nationals' Senator Barnaby Joyce says he is concerned about
the potential impact on Sydney's status as a regional financial
hub, given that the merged company will be run from Singapore.
"Obviously, in the discussion, people in the town of Sydney will
have some clear questions to ask about if there's a removal of the
commerce that's involved with the Stock Exchange to another
country, with the removal of the merchant banks with it, where does
that leave Sydney?"
The Coalition's shadow treasurer, Joe Hockey, says it is up to
Wayne Swan to explain how it is in Australia's national interest
for the ASX to be controlled by a Singaporean company.
"We welcome investment, but we also have to make decisions about
a monopoly," he said.
"I mean, the ASX is effectively a monopoly and, therefore, as a
monopoly, is it in our national interest to have, not only a
foreign exchange own it, but a foreign exchange with a substantial
shareholding from its own government."
However, the Treasurer says it is a matter for the regulators at
this stage, not the Government - and there are plenty of regulators
who will be scrutinising the deal.
The Foreign Investment Review Board, the Australian Securities
and Investments Commission, the Reserve Bank and the Australian
Competition and Consumer Commission will all be having a look.
If they recommend approval, it will then fall to Treasurer Wayne
Swan and the Government to decide whether to sign-off.
Even if Mr Swan gives the green light, the Parliament will have
to approve a change in regulations in the Corporations Act to allow
the deal to proceed, because there is currently a 15 per cent limit
on the stake any one party can hold in the ASX.
That is no fait accompli given the fragile numbers in both the
House and the Senate and the hostility expressed towards the
planned merger by many MPs.
Mr Swan has told Parliament the Government will make sure the
deal is in the national interest.
"Australia rigorously applies a national interest test, in
foreign government investment and significant private sector
investment, and of course this particularly applies to a proposal
of this scale and this importance," he said.
The head of the Stockbrokers' Association, David Horsfield, says
that is why ASX shares are trading so far below the offer price of
around $48 a share.
"It's the regulatory risk that people are building into the
share price at the moment," he said.
But he says the deal does seem to offer significant benefits to
both exchanges.
"There's no doubt that the cost efficiencies by the two
exchanges coming together seem to be quite significant."
Share analyst Andrew Hills from Wilson HTM says the deal is
attractive to ASX shareholders.
"It's a fantastic deal for ASX shareholders. I mean, the premium
of this transaction values ASX at a 37 per cent premium to its
previous close," he explained.
However, he says the real benefit to shareholders is much lower,
because the company would be taxed in Singapore and unable to give
franked dividends.
"Current ASX shareholders will not receive franking credits in
the merged company, so that reduces the premium by about 20 per
cent or so, depending on how you value franking credits," he
added.
Investors seem to have cottoned onto that, with ASX shares
trading at $39.48 by 1:27pm (AEDT), after hitting highs of almost
$44 yesterday.
ASX shares had dipped even lower this morning, to $38.18 by
12:17pm, after the comments by Senator Brown and other MPs.
Investors also seem to think Singapore's exchange is overpaying,
with its shares falling around 6 per cent yesterday, and another 2
per cent today.
- ABC News
