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The Johannesburg Stock Exchange (JSE) and the Bond Exchange of South Africa Limited (BESA) have both welcomed the news that the Competition Tribunal has today given unconditional approval for the merger of the two businesses. This decision, together with the approvals already obtained from the South African Reserve Bank and the Financial Services Board, means that all regulatory approvals required for the merger to go ahead have been obtained.
The final step in the process is the application to the High Court of South Africa to sanction the scheme of arrangement, in terms of which the JSE will acquire the entire issued share capital of BESA. The parties expect this application to be heard on or about 9 June 2009, followed by the registration of the Court order by the Registrar in terms of the Companies Act.
If the scheme is sanctioned by the Court, BESA will become a wholly owned subsidiary of the JSE on or about 22 June 2009. Anyone who held BESA shares on 19 June 2009 and surrendered his or her documents of title will receive R125 for each of their BESA shares. This transaction values BESA at about R240.6m.
Newton-King, Deputy CEO of the JSE, said the JSE’s intention will be to harness the areas of expertise of the two exchanges to deliver increased liquidity, increased functionality and a broader range of products and services to market participants, bond issuers and investors.
“Both the JSE and BESA believe that the merger will benefit the South African interest rate market,” says Newton-King. “The integrated group will deliver a single exchange on which spot and derivative products are traded, and should prompt increased trade. The integrated entity will also be able to achieve improved common risk-management processes, critical to ensuring confidence in any capital market.”
Newton-King said that the JSE will consult with all stakeholders in the coming months to develop a new strategy to grow both spot and derivative interest rate markets. Under the leadership of the current BESA CEO, Garth Greubel (who will join the JSE’s Executive Committee), and the JSE Director: Equity Derivatives, Allan Thomson, a team from the combined JSE/BESA will launch a strategic review of the two exchanges’ products and services, trading models and technology solutions.
“There will be no “holy cows” in this strategic review,” said Greubel. “Its purpose is to determine how the combined JSE/BESA can meet market requirements. This will necessitate a level-headed review of the capabilities of BESA and Yield-X (on reporting, trading, clearing and settlement) and an open-minded decision on the best existing technology or even new technology required to meet participant needs.”
The impact on users immediately after the merger will be minimal.
“Initially, the JSE will continue to offer all the products and services of both BESA and Yield-X (the JSE’s interest rate market), using the two exchanges’ respective systems,” said Greubel. “Listings requirements, membership requirements and trading, clearing and settlement rules will remain unchanged for both BESA and Yield-X users. All BESA staff will become employees of the JSE and BESA’s operations will be moved to the JSE’s Sandton premises. Similar to its experience after the merger of the JSE and SAFEX in 2001, the JSE anticipates that this merger will offer BESA and Yield-X staff new and increased career growth opportunities.”
Newton-King noted that “Offering the right products and services to clients is only one side of the coin; the JSE also has to ensure that it does so at competitive prices. The intention is that the merger will lead to cost reduction over time. The JSE is therefore undertaking to retain BESA’s fees structure without increase for two years and to investigate means of lowering those fees where practicable. “
Further information can be obtained at http://www.jse.co.za/besa-deal.jsp and http://www.bondexchange.co.za/besa/view/besa/en/page46150
