The rich bid by Singapore's exchange operator for the company that owns Australia's main stock exchange may be the catalyst to give a lift to the long lagging share price of TMX Group Inc.
Singapore Exchange has agreed to pay $8.3-billion (U.S.) for ASX Ltd., a valuation that's equivalent to 23 times ASX's forward earnings, and about double the valuation that TMX Group fetches right now.
"We believe the probability of a similar takeover bid for (or by) TMX Group is low, but the SGX/ASX tie-up could nevertheless drive positive sentiment for the shares," National Bank Financial analysts said in a report.
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A valuation of 23 times forward earnings would put TMX Group shares, which trade under the symbol "X," at around $61.
"We believe this will reflect positively on X as ASX also has a strong resource focused business," GMP Capital analyst Stephen Boland said in a report.
Analysts are also carefully watching what Australian regulators say about letting the country's main exchange operator go to a foreign buyer. Any cross-border combination involving TMX Group would require similar consents from Canadian regulators.
"If the Australian government does approve the deal with conditions, we can envision the possibility of speculation on an X takeover will increase," Mr. Boland said.