FT sells Singapore bourse for $150 mn

Buzz of similar stake sale in DGCX; NSEL investors say they'll sue if money got isn't used to clear their dues

In the first big-ticket asset sale by the Financial Technologies (FTIL) group after the fiasco at National Spot Exchange Ltd (NSEL), the company has sold Singapore Mercantile Exchange (SMX) to the Intercontinental Exchange Group Inc (ICE).

It was an all-cash deal, for $150 million (Rs 930 crore). SMX was a successful multi-asset class exchange.

Analysts had been expecting the deal and do not rule out more. Stake sale in FT’s Dubai-based joint venture exchange, DGCX, is also being talked about. In DGCX, the FT group’s holding has come down to 33 per cent and after disputes with the foreign partner, it was looking for sale of the remaining stake. Apart from these, the FT group has three other exchanges abroad. Trading on SMX began in August 2010.

FTIL sent a notice on Tuesday to the stock exchanges that money raised by the sale of SMX would be utilised towards payment of debt obligations from external commercial borrowing and foreign currency loans from banks, subject to regulatory approvals.

On Monday, the share price was up nearly 20 per cent on buzz of some settlement. Then came the deal and a disclosure by ICE, which bought SMX along with its clearing corporation subsidiary. ICE said it would implement technology changes in SMX. On these, the share price of FT on the BSE and National Stock Exchange corrected and closed only 2.1 per cent up, to Rs 185.05. At present, all technology has been provided by FTIL and if this changes, could hurt its revenue.

For the deal, ICE's financial advisor was Morgan Stanley. The legal advisor was Shearman & Sterling LLP, while FTIL's financial advisor in the deal was Moelis & Company. FTIL's international legal advisor is Rajah & Tann. There were three contenders for the exchange in the deal, said the source.

While FTIL declined to comment on what could be the next asset sale, there is a buzz in the market on a stake sale in DGCX.  

SMX was loss-making but the situation was improving. However, soon after NSEL suspended trading, in July-end, the volumes on all exchanges abroad of the FTIL group started falling. SMX volumes fell sharply from a daily average of 2,265 lots in July to only 438 in November. No trading has taken place in the past three months on BFX, the group’s Bahrain-based exchange. On GBOT, its Mauritius-based exchange, volumes are down from 1,133 lots in July to 827.

The NSEL Investors’ Forum said on Tuesday, in a letter written to the board of FTIL, that they’d seek legal action if the money raised by selling SMX was used to pay bank loans, instead of settling what was owed to them. After signing the deal, Jignesh Shah,  , said he hoped “the success of SMX will inspire many more entrepreneurs in both countries to create similar success stories”. He said he’d mixed emotions about parting with an asset he’d nurtured and would be happy to watch it scale new heights under ICE.