Today, in a forlorn statement, the SGX said, the parties have agreed to mutually terminate the merger implementation agreement entered into on October 25, 2010. No revisions to the bid, then: its over.
That the SGX wont 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 Australian national interest always a nebulous concept and partly about timing. There could hardly have been a worse moment 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 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 everyone seemed to know all this from the start. Magnus Bocker, chief executive of the SGX 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. He was right on all of it, as the ASX could clearly see; hence 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. In that he miscalculated.
In the short term, the only people to have benefited are the banks. They have earned fat 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 enjoying their moment in the sun. If Bocker has successfully represented Singapore as the best possible hub through which to bring Asian liquidity into an international alliance, then it may be well placed to tie up either with Bockers old employer, Nasdaq OMX, or even suitors such as the Chicago Mercantile Exchange.
If so, 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. If Bocker is right in thinking Asia will make up half of the worlds financial markets within a decade, then its role in any merged global group ought to reflect that. 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; our money is on Nasdaq.
If none of that comes to bear, though, Bockers reputation will have been dented unquestionably. The ASX bid was the signature flourish of a new chief executive in his first year. If all it did was cost lots of money in advisory fees, it is not such a great way to start.