NZ dusts off standalone plans

By ELLEN READ

The New Zealand Stock Exchange plans to go ahead with its demutualisation and may list its own shares on the exchange despite the collapse of merger talks with its Australian counterparts.

The end of the two exchanges' engagement was revealed yesterday in a brief statement from the Australian Stock Exchange (ASX), but neither party would say who called off the wedding.

NZSE chairman Simon Allen said last night: "In the event, merger proposals became more in the nature of a straight takeover of the NZSE.

"Accordingly we have been unable to reach agreement on terms which would be acceptable to New Zealand investors, companies and NZSE members."

The ASX statement said that merger talks had ended because "it would not be possible at this stage to reach a solution which ASX felt would be acceptable to both NZSE members and ASX shareholders."

ASX spokesman Gervase Greene declined to elaborate. But the ASX has steadily been losing patience with the NZSE. Its chairman, Maurice Newman, said last month that the talks had been going on for years and could not continue indefinitely.

Finance Minister Michael Cullen said he was disappointed the talks had collapsed as he believed the merger had a lot to offer New Zealand.

" hope either that the initiative is revived at some later stage or that other ways are found to capture some of the potential benefits," said Dr Cullen.

A broker, Murray Birkett from Craig & Co, also expressed disappointment.

"We think that the capital markets would benefit from increased access by Australia to quality markets in New Zealand.

"We don't know all the details as yet, but in a nutshell we would hope that we get closer to Australia, not distance ourselves."

Mr Allen said that the exchanges had been unable to reach agreement on key areas, including commitment to servicing and expanding the local capital market.

The ASX proposal would have required New Zealand intermediaries and investors to bear all the costs of changes to use the ASX systems immediately rather than in a transitional programme.

Australia's requirement for a cross-currency model for trading and settlement had involved New Zealand investors bearing all the currency conversion costs.

"Prices for services in New Zealand would generally at least double to match Australian prices. NZSE systems integrations and efficiencies would be lost," Mr Allen said.

"The reality is that as a commercial entity, ASX cannot commit to servicing the New Zealand capital market as a priority over other operations and developments."

For the same reason, the ASX had not considered the NZSE proposals commercially viable.

New Zealand proposals had been for a common multi-currency trading and settlement platform, with costs of currency conversion shared by both markets, a commitment to New Zealand's capital market, a phased integration of systems and mutual recognition of legal and regulatory regimes and supervision.

But the decision to conclude merger talks was not so much the end as the beginning of a new chapter, said Mr Allen.

"We began working on a new direction for the NZSE before the ASX merger proposal came about and now we can get back on to that."