SGX buys 5% of Bombay Stock Exchange for $65m

THE Singapore Exchange (SGX) has acted on its long-flagged interest in Bombay Stock Exchange (BSE) with an announcement yesterday that it will take a 5 per cent stake in BSE for US$42.7 million (S$65.3 million).

The investment is SGX's first equity investment in another stock exchange and comes after months of talks to buy a stake in the Indian bourse operator.

Besides the initial investment, SGX has also agreed to invest up to US$17.3 million more to maintain its 5 per cent stake in the event of dilution. If that happens, it would take its total investment to US$60 million.

Both exchanges have agreed to actively explore collaboration in areas such as listings and product development, they said in a joint statement yesterday.

The collaboration will tap SGX's leading position as a regional hub for derivatives and international listings, as well as BSE's strong presence in India.

The oldest stock exchange in Asia, BSE was set up in 1875 as 'The Native Share and Stock Brokers Association'. There are now 4,800 companies listed on BSE, with a total market capitalisation of US$850 billion. Besides handling trading of shares and derivatives, BSE also offers trading of corporate and government securities.

SGX is the second foreign bourse to take a BSE stake, after Germany's Deutsche Boerse said last month it will buy a 5 per cent stake. It is paying a similar price of 5,200 rupees (S$178) for each BSE share.

Other exchanges said to be interested in BSE include the London Stock Exchange, Nasdaq and the New York Stock Exchange (NYSE).

SGX chief executive Hsieh Fu Hua said SGX will support BSE's goal to strengthen its international position. 'Together, we aim to identify new business development opportunities and to foster an enduring partnership that is beneficial to both exchanges and our customers,' he said.

SGX's investment is in line with its strategy of building an Asian gateway for securities and derivatives products, he added.

SGX took into account comparative values for listed exchanges and precedent transactions to arrive at the agreed investment cost for the BSE stake, it said.

BSE's move to attract global allies comes after rival bourse National Stock Exchange sold a 20 per cent stake to investors led by NYSE and Goldman Sachs.

The investments come in the wake of alliances between global bourses, such as NYSE's US$10 billion merger with Euronext.

Tying up with SGX will give BSE the 'Asian advantage', said BSE managing director and chief executive Rajnikant Patel.

SGX brings a 'huge amount of learning' to the partnership, he said.

'This partnership will not only be mutually beneficial to both the exchanges, but also complement our association with Deutsche Boerse.

'This alliance will position BSE to be an important player in the increasingly globalised marketplace,' he said.

The deal is subject to regulatory and shareholder approvals.

Yesterday, SGX shares rose five cents to $6.35.

audrey@sph.com.sg