Business Times: Singapore Exchange Ltd (SGX) unveiled an agreed A$8.4 billion (US$8.3 billion) takeover offer for Sydney-based ASX Ltd today to create Asia’s fourth-largest stock exchange.

SGX offered a combination of A$22.00 in cash plus 3.473 of its own shares, valuing ASX shares at A$48.00 each – a 37 per cent premium to their last trade on Friday.

It faces several hurdles, including needing Australia’s parliament to lift a 15 per cent ownership cap on ASX and Foreign Investment Review Board (FIRB) approval of the deal.

Shares in ASX spiked as much as 25 per cent to A$43.89 after it resumed trade, still well short of a record high of A$61 in early 2008, and were up 20 per cent at 0330 GMT.

SGX shares fell as much as 6.7 per cent and last traded down 5 per cent at S$9.06.

SGX said it had secured an 18-month bridging loan to finance the deal and would not be raising equity ahead of the purchase, expected to complete in the second quarter of 2011.

SGX vs ASX on Oct 25 2010 (Source: Bloomberg)

My two cents: It appeared the news is not well received, some people feel the takeover price was too high and markets are concerning about the regulatory issues.

Investors should bear in mind that in Merger and Acquisition, the taking over party (SGX) price will drop and the taken over (ASX) price will rise. as shown above.

Be very careful when you are catching a falling knife.

About the Author

Ivan Guan is the author of the popular book "FIRE Your Retirement". He is an independent financial adviser with more than a decade of knowledge and experience in providing financial advisory services to both individuals and businesses. He specializes in investment planning and portfolio management for early retirement. His blog provides practical financial tips, strategies and resources to help people achieve financial freedom. Follow his Telegram Channel to join the FIRE community.
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