The Australian Securities Exchange is examining a possible bid for two share registry businesses owned by the country’s biggest private equity group as its looks to extend its product offering and geographic reach.
The ASX, which year last saw an $8.4bn plan to combine with the Singapore Exchange blocked by Australian regulators, on Friday said it had signed a confidentiality agreement to receive information on Link Market Services and American Stock Transfer & Trust Company.
People familiar with the situation said it was too early to say if the Sydney-based exchange would make an offer for either business, both of which are part of the wider Link Group.
The ASX is just “kicking the tyres at this stage”, said one of the people.
Stock exchange groups worldwide are under pressure to consolidate or find new revenue streams because of increased competition from alternative trading platforms such Chi-X, which has captured three per cent of the Australian share market since its debut late last year.
Exchanges are also contending with weak share trading volumes. In May, the ASX reported a 2.7 per cent fall in underlying profit after tax for the nine months that ended in March. It blamed subdued activity in its equity related business.
The A$5.2bn exchange has been trying to offset the slowdown by expanding other parts of its business such as its technical services division, which provides trading and clearing technology.
Elmer Funke Kupper, ASX chief executive, has been developing a pipeline of new businesses and hunting for alliance partners.
The ASX sold Link Market Services, or ASX Perpetual Registrars, as it was then called, to Pacific Equity Partners seven years ago for A$130m (US$126m).
Under its new owner Link Group has made more than 20 acquisitions since 2005, including American Stock Transfer & Trust Company, which provides stock transfer and save-for-share schemes to 2,800 public companies
PEP has been searching for a partner to take a stake in Link Group, valued at up to A$1.4bn including debt.
The process has reportedly drawn interest from a number of private equity groups including Bain Capital, Blackstone and Hellman & Friedman.
Friday’s news comes a day after comments from Mr Kupper urging Australia to integrate more closely with Asia.
To do that, “we have to change our decision-making processes and align them more with our Asian partners,” he told the Stockbrokers Association of Australia.
ASX shares fell 0.2 per cent to A$29.39 in Sydney on Friday.