ASX Limited (ASX) and Singapore Exchange (SGX) today announced that they have entered into a merger implementation agreement to combine to enable customers globally to capitalise on listing, trading, clearing and settlement opportunities created through the expanded platforms, leveraging on the importance of Asia Pacific as the driver of global growth.

This combination will bring together the complementary businesses of two successful exchanges in the Asian time zone, with internationally recognised regulatory standards. The combination leverages the strengths of ASX through its listings, stock options and fixed income franchises, with SGX, the Asian gateway for international listings, equity futures and OTC clearing, to create the region’s pre-eminent exchange group.

The combined group will augment Australia’s financial market and funds management industry through direct participation in Asian growth, and increase ASX’s and SGX’s competitiveness in a changing global markets landscape. As proven platforms for raising capital and managing price risk for the resource sector, ASX and SGX will build on existing distribution and clearing capabilities, and intend to play an important role in establishing price discovery for global commodities in Asia Pacific.

The combined exchange group, ASX-SGX Limited, will have pro forma revenues of approximately US$1.1 billion ($1.4 billion) and pro forma earnings before interest and income tax of approximately US$700 million, based on the audited financial statements of ASX and SGX, each for the financial year ended 30 June 2010 (FY2010).

Together ASX and SGX will offer access to:
• second largest listing venue in Asia Pacific with over 2,700 listed companies from over 20 countries, including over 200 listings from Greater China;
• world’s second largest cluster of companies in the resource sector (more than 900 listings), the largest REITs sector (over 80 listings) and the largest number of ETFs (over 100) in Asia Pacific;
• world’s widest range of Asia Pacific equity, fixed income and commodity derivatives with over 400 contracts from over 10 countries, including Australia, Greater China, India and Japan, and covering a range of commodities including metals, energy and agricultural products;
• Asia Pacific’s largest and the world’s second largest base of institutional investors with combined assets under management of over US$2.3 trillion from existing superannuation, institutional and sovereign wealth funds;
• global distribution network with over 90 securities market participant firms and over 170 derivatives market participant firms on a combined basis; and
• leading exchange technology, including the proposed introduction of the world’s fastest trading platform with the lowest trading latency, and flexible data and connectivity solutions.

ASX and SGX will remain separate legal and locally regulated entities, and will maintain their existing brands. This will allow the two exchanges to maintain their existing iconic identities, which are well established in their home markets and internationally, while enabling customers to benefit from cross-market synergies and the greater scale, diversity and broader expertise of the combined group.

The combination of ASX and SGX will diversify the product and customer bases of the two exchanges and create cross-access opportunities for market participant firms. Listed companies will benefit from the increased profile of the listing platform among the global investing community and be able to benefit from an enlarged liquidity pool of investable funds.

The combined group will be able to harness an expanded and compatible reservoir of skills to further develop and grow the Australian and Singapore marketplaces. The combined group will also enhance its attractiveness as a partner of choice for future exchange industry collaboration and consolidation opportunities to tap into strong regional growth.

While ASX and SGX currently achieve a high level of operational efficiency, pre-tax cost synergies and other transaction-related cost savings - comprising IT and non-IT related savings - are estimated to be US$30 million annually based on existing cost structures.

In addition, given the complementary nature of the two businesses and their existing organic growth prospects, growth opportunities are expected to be derived from the introduction of new products and services in both markets. This will arise through leveraging expanded capabilities, opportunities to cross-sell services and grow trading activity from access to an enlarged member and investor base, and a greater ability to attract international listings as a result of an improved competitive positioning.

The pro forma market capitalisation of the combined group was approximately US$12.3 billion1 as at 22 October 2010, creating the world’s fifth largest listed exchange group with a broad international shareholder base. The combined group is expected to have an increased weight in selected benchmark indices and will have added visibility among institutional investors globally.