THE DISTILLERY: Agonising over ASX

More argy bargy over the proposed Singapore takeover of the ASX, with some commentators surprisingly surprised at the opposition and showing how far removed they are from many of their readers. Stockland's failed GPT gambit is also recorded as is Paul Little's looming retirement at Toll, but later this morning it will be back to bank profits and "rate rise looms" with the release of the NAB's 2010 earnings and the September quarter CPI.

The Australian Financial Review rightly said this morning: "All eyes will be on the Australian Bureau of Statistics this morning when it releases consumer price index data for the September quarter, a key input into the central bank's monetary policy decision next week." And the paper also says the latest review of the shape of the CPI will be released next month. The big change wanted from the review is a move to monthly figures from the quarterly we now have. And surprisingly, that was the only foreshadowing of the CPI in the blats this AM.

The stock exchange merger again attracted plenty of comment. The Sydney Morning Herald wrote: "Deep concerns about the tie-up were raised in a meeting of Coalition MPs and both the independent MP Bob Katter and the Greens said they were opposed. Labor backbenchers also expressed private worries about the policy and political wisdom of approving the deal. Mr Swan promised to protect the national interest and the ASX's ''market integrity'' before giving the go-ahead, but the market responded to the uncertainty with a 7.4 per cent fall in the company's share price yesterday."

The AFR's Chanticleer wrote: "Australia's lack of engagement with Asia at a corporate level means there are few champions in the business community of the $16 billion ASX Ltd-Singapore Exchange merger. The deal needs as many friends as it can get following an extraordinary political backlash." Not so extraordinary, Chanticleer. Singapore isn't liked on both sides of politics, especially for the barbs from Lee Kwan Yu and the authoritarian rule dressed up as democracy.

Fairfax's Malcom Maiden was paying closer attention than Chanticleer this morning: "The Singapore Exchange's proposed $8.4 billion takeover of ASX is going to have to be changed in Australia's favour to succeed. I say Australia's favour rather than the ASX's favour, because the bid is already generous enough to succeed commercially ... the reaction in Canberra showed the deal in its current shape is politically untenable. After taking over ASX, the Singapore Exchange is hardly likely to make decisions that hurt the value of the investment. But the message from Canberra is that for the deal to become politically palatable, its terms must change, to give ASX's leaders a greater say in the destiny of the merged business. One step is more ASX directors on the holding company board."

According to The Australian, former ASX chairman, Maurice Newman blames Canberra for allowing more competition for the ASX move: "The former ASX chairman and current chairman of the ABC, Maurice Newman, slammed the criticism and warned that rejection of the proposal risked consigning Australia to the ranks of a financial backwater. He said government itself was responsible for the exchange's decision to seek a partner as it had 'damaged the central market' in Australia when it granted an exchange licence to a rival firm, ChiX." And the ASX was a monopoly that was already losing business offshore.

The paper's Bryan Frith had the smartest comment: "The focus should be on trying to make the proposal work not on knocking it back. And in that context the politicians should not be hung up on ownership but concentrate on ensuring the right corporate governance is in place. There's plenty of work to be done on that front." That was after he echoed Mr Newman's comments on increased competition being the root cause. And another writer on the paper, Matthew Stevens wrote: "We have an opportunity here to set some sensible ground rules about who and how our core financial services might be owned in the future. It is routinely speculated, for example, that ANZ's fate lies in some kind of bridging alliance with the Asian banking system. The consideration of the fate of the ASX-SGX proposal should provide government and the regulators with an opportunity to create a guiding framework for Australia's further engagement with Asia's capital markets."

Business Spectator's Stephen Bartholomeusz wrote in the late afternoon edition yesterday: "Less than 24 hours after unveiling the proposed merger of the ASX and Singapore Exchange, Rob Elstone and his SGX counterpart, Magnus Bocker have been reminded that the biggest obstacle to the deal lies in front of them. Already Joe Hockey, Bob Brown and Bob Katter have expressed reservations about the concept of the ASX being acquired by SGX. Given that the deal needs parliamentary and ministerial consents to remove ASX's shareholding limits, the complicated politics of the current parliament represent a significant threat to the proposal. The market's response to the announcement was largely enthusiastic, although the dive in SGX's share price suggests that it has some work to do to convince its own investors of the merits of acquiring ASX."

The shareholders revolted at Transurban, again, over executive pay, again: "Transurban's board has been dealt a stinging rebuke for the third year in a row after shareholders voted down its executive pay report and a multimillion-dollar share plan for its chief executive, Chris Lynch. The strained relationship with its two largest shareholders, the Sydney fund manager CP2 and a big Canadian pension fund, was also laid bare at the toll road company's annual meeting in Melbourne yesterday." The board will say a lot and we will be back here next year for round four. The AFR pointed out there was also a revolt at yesterday's Billabong AGM: "Shareholders' resounding rejection of Transurban and Billabong's 2010 remuneration reports underscores the backlash many boards will face this AGM season from investors frustrated over what executives earn."

John Durie wrote in The Australian that Paul Little will be missed, at Toll... but then points out he won't be gone at all: "Little plans to return to Toll in a non-executive role after a break. This breaks every good governance rule and puts whoever replaces him in a difficult position. But Little has always focused more on performance than governance rules, right down to the present controversy over the terms of his retirement pay."

And the costly failure of Stockland to bid for rival property group, GPT, came a week after criticism of executive pay at the company's AGM, according to The Sydney Morning Herald's Carolyn Cummins: "Taking into account capital raisings by both groups over the past two years and GPT's share consolidation, on paper Stockland looks to have lost as much as $200 million on its initial investment. This comes a week after Stockland's chairman, Graham Bradley, defended a 20 per cent fall in earnings per security at the group's annual meeting, as some executives' short-term performance incentives doubled. In the year to June 30, Stockland's chief executive, Matthew Quinn, received a 41.7 per cent rise in short-term incentives from $1.235 million to $1.75 million. His total package was $4.74 million, up from $3.38 million in the previous financial year." No wonder CEO pay is an issue with shareholders. Stockland will be hard pressed to earn a profit this half year.