(FT) -- Shares in SGX, the Singapore exchange, fell nearly 7 percent after it unveiled an agreed A$8.4bn (US$8.2bn) offer for Australia's ASX in a deal that would create Asia's second-largest exchange group.
Under the plan announced on Monday, SGX plans to buy the Australian exchange using a mix of cash and shares as competition and the growth of electronic trading is forcing the region's players to consolidate.
It will pay A$22 cash and 3.473 new SGX shares for each ASX share, valuing the ASX at A$8.4bn (US$8.2bn) or A$48 a share.
ASX shares rose as much as 25 percent to A$43.89 after they resumed trading on Monday. The deal is pitched at a 37 percent premium to Friday's closing price of A$34.96.
A combined group would be the fifth largest exchange in the world, behind Deutsche Börse, and second in Asia after Hong Kong Exchanges & Clearing, as measured by the market capitalisation of the exchanges as listed entities.
While both SGX and ASX are profitable neither can grow much beyond their domestic markets by staying independent, analysts say.
Niki Beattie, managing director of The Market Structure Practice, a London-based consultancy, says: "Strategically long-term, in terms of surviving in the Asian market, they have both got to do a deal. And they are probably the least contentious partners for each other".
The SGX has in recent months stepped up links with other exchanges as part of its strategy to be what it calls "the Asian gateway," including agreeing on Friday an arrangement with Nasdaq OMX to offer companies opportunities for listing on both exchanges.
ASX has been upgrading its trading systems and fee schedules to deal with competition from alternative platforms and to attract the high-frequency traders that are flocking to Asia.
CNN
