AFR: What next for Magnus?
5 April, 2011Asiamoney.com: What the wealthy should learn from Stanley Ho’s woes
14 April, 2011Euromoney, April 8 2011
This week the Australian Treasury did what most in the market had seen as inevitable for months: it nixed the Singapore Exchange’s bid for its Australian counterpart, the ASX. Today, in a somewhat forlorn statement, the SGX sad that “the parties have agreed to mutually terminate the merger implementation agreement entered into on 25 October 2010.” No revisions to the bid, then; it’s over.
The fact that the SGX won’t try again reflects the fact that the bid was rejected because of something it could do absolutely nothing about: Australian political sensitivity. Partly this was about the tricky question of the Australian national interest, which has always been a somewhat nebulous concept. But also it was the fact that there could never – literally never – have been a worse time to get a politically dicey development through an Australian parliament. The government has no majority; it is only in office at all because of the assistance of a couple of independent parliamentarians who must be kept happy. In such circumstances, nobody was ever going to expend the political capital required in order to change the law and allow the national stock exchange to be taken over by a foreigner. Who gets re-elected on a platform like that?
The odd thing is that everybody seemed to know all this from the start. SGX CEO Magnus Bocker – who has completed more exchange mergers than anyone – built his pitch from the outset on efficiencies, logic, technology, liquidity; the nuts and bolts of an exchange merger in a new world of capital flows. And he was right on all of that, as the ASX could clearly see, hence the fact it backed the bid from the outset. But that was never the point on which the deal would thrive or fail. Bocker thought the force of this logical argument would be enough to get it through Australian politics and public opinion, and in that he miscalculated.
In the short term, the only people to have benefited are the banks who made a great deal of money in M&A advisory fees on a deal that they must have suspected from the outset could not go through. But what has it done to Bocker and the SGX?
It may not all be bad. It has certainly raised the profile of the SGX at a time when global exchange mergers are once again the flavour of the month. If Bocker has successfully represented Singapore as the best possible hub through which to bring Asian liquidity – current and future – into an international alliance, then it may be well placed to tie up either with Bocker’s old employer, Nasdaq OMX, or a mooted suitor like the Chicago Mercantile Exchange. If so, then everything will depend on the terms through which SGX enters such a deal. SGX being bought outright by a US institution would be politically difficult in Singapore. And if Bocker is right in thinking Asia will make up half of the world’s financial markets within a decade, then its role in any merged global group ought to reflect that. But some sort of partnership, or a stakeholding allowing Singapore access to a global network while retaining some autonomy, might work well. Market chat is about CME, but our money’s on Nasdaq.
If none of that comes to bear, though, Bocker’s reputation will unquestionably have been dented. The ASX bid was the signature flourish of a new CEO in his first year. If all it did was cost a ton of money in advisory fees, that’s not such a great way to start.
