Two major deals involving Australian companies have fallen over or hit hurdles in the past week, but lawyers remain unperturbed. The proposed A$8.4bn merger between the Australian and Singaporean stock exchanges has been officially rejected , while Centro Properties Group’s A$9.4bn sale of its assets to the Blackstone Group remains uncertain as shareholders pursue legal action.

Lawyers claim they are unconcerned about the potential for similar deals to suffer the same fate: “The Foreign Investment Review Board (FIRB) and the Treasurer approve almost all proposed mergers, it’s only in the rarest cases they have not,” said Ben McLaughlin, an M&A partner at Baker & McKenzie. Jeremy Low, a partner within the M&A and capital markets group at Allens Arthur Robinson, agreed: “It is government policy to welcome foreign investment. Even in cases of Chinese state owned enterprises making acquisitions there is a work around to avoid any national security issues,” he said.

McLaughlin noted that there is a distinct trend globally towards stock exchange mergers following deals within Canada, Germany, the US, Dubai and London in the past three years (see table below for full details); the focus for lawyers  going forward will be on presenting an alternative arrangement to the FIRB rather than pursuing a different strategy altogether, he added.

McLaughlin also said he believed the Treasurer Wayne Swan flagged a second merger attempt as a possibility in his reasons for rejecting the merger. “There are two major issues [from the reasons given]:  future regulations with respect to clearing and settlement systems and whether [the merger] would diminish Australia’s role as a global financial centre. There is the capacity to come back with some other type of deal, for example a joint venture where we do not have control ceded to the SGX. They could also split up the ASX so that clearing and settlement is separate,” he said.
Aside from two well documented takeover bids made by Chinese Nonferrous Metal Mining Group and China Minmetals to acquire Lynas and Ozminerals respectively, the last time a takeover was officially blocked was in 2001 when then Treasurer Peter Costello rejected Shell’s takeover bid for Woodside Petroleum. “Lawyers are very comfortable with this part of the process when acting for foreign businesses,” said McLaughlin. However, there is also a need to carefully consider obligations, especially with foreign bidders. “We meet with members of the FIRB and they meet with other government departments in order to get the application in a state which will meet their requirements,” he added.  Freehills and Clayton Utz  were advising the ASX and SGX on the merger respectively.

While the ASX deal is officially over for now, the multi-billion dollar Centro deal remains in limbo with security holder, Smartec, pursuing legal action to force Centro to reveal information about the deal and finance arrangements, challenging the idea that the sale of US assets does not require security holder approval. Centro has engaged with Smartec in an attempt to avoid litigation, but to no avail, according to an ASX statement. No further details on the deal are available at this time. Freehills is also involved in the sale of the Centro assets, as is Gilbert + Tobin.

Stock exchange mergers since December 2007