Singapore Exchange to buy 5 pct in India's BSE http://in.today.reuters.com/news/newsArticle.aspx?type=businessnews&storyID=2007-03-07T212211Z_01_NOOTR_RTRJONC_0_India-290263-1.xml
Wed Mar 7, 2007
By M.C. Govardhana Rangan
MUMBAI (Reuters) - India's Bombay Stock Exchange Ltd. (BSE) said on Wednesday it was selling a 5 percent stake to Singapore Exchange (SGX) for $42.7 million, following a similar deal with Deutsche Boerse last month.
The first foreign acquisition by SGX, Asia's third-largest listed bourse, is the latest in a series of agreements between international exchanges, which are under pressure from customers to offer global services and cut fees.
SGX Chief Executive Hsieh Fu Hua said he was open to more acquisitions in other markets and was keen to work with BSE to encourage Indian firms to list in Singapore.
BSE, India's oldest stock exchange, hopes to expand its influence in the region with the help of the deal.
"This partnership will help us leverage the growth potential in the region. This is probably a step in the integration of regional markets," BSE Chief Executive and Managing Director Rajnikan Patel told reporters.
BSE was selling shares at 42 times its March 2006 earnings, while some international exchanges can trade at 35-48 times their earnings, he said.
Last month, Germany's Deutsche Boerse paid $42.7 million for a 5 percent stake in the BSE, a deal that the Indian exchange said at the time valued it at $910 million.
That was far below the $2.3 billion valuation of the National Stock Exchange, BSE's rival for little more than a decade, after NYSE Group Inc. and others including Goldman Sachs paid $460 million for stakes totalling 20 percent in January.
Analysts say the higher valuation for NSE was due to higher trading volumes, especially in the increasingly popular derivatives segment, though the country's benchmark stock index is on the BSE.
On Tuesday, the NSE's cash segment turnover of 83.61 billion rupees was more than double that of BSE's 38.16 billion rupees, while on the derivatives side, NSE turnover was 354 billion rupees, compared with BSE's 8.98 billion. BSE and SGX said in a joint statement they had agreed to explore collaboration in listings and product development.
Hsieh said there was no conflict of interest with Deutsche Boerse, which also hopes to launch new products with the BSE.
"We are two completely different animals. We have different points of strength. Neither of us has an issue," he said.
Hsieh was upbeat about returns on the investment in BSE.
"This is a stepping (stone) fee for us. We have seen that the business of an exchange is a profitable business," he said when asked how SGX would get a return on this investment.
The BSE, which was established in 1875, needs to reduce the stake held by its brokers to 49 percent - by stake sales and a possible IPO - to abide by a government directive aimed at making the exchange professionally run. The interest in India's vibrant stock exchanges follows several consolidation attempts among the world's bourses.
Last month, Nasdaq Stock Markets Inc., a rival of the NYSE Group, failed in its bid to take over the London Stock Exchange, Europe's largest share market.
Earlier, the NYSE Group announced a strategic alliance with Asia's biggest bourse, the Tokyo Stock Exchange.
Nasdaq has signed memorandums of understanding with the Shanghai Stock Exchange, Korea Stock Exchange and Jasdaq, Japan's biggest market for initial public offerings.
Kotak Mahindra Capital Co. advised BSE, while UBS advised the Singapore Exchange on the deal.
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