NZX seeks to take control of Aust NSX

New Zealand share market operator NZX Ltd is seeking to take control of NSX Ltd, the operator of a market for small and medium sized companies in Australia.

The deal has a number of twists. NZX is buying new shares so it is not making an offer to existing shareholders and effectively recapitalises the NSX business.

NSX's shareholders include Sir Ron Brierley's Guinness Peat Group, which has a 14 per cent holding, and the company has been facing a shareholder revolt seeking to unseat directors.

NZX is likely to have to raise equity to pay for this and other previously announced purchases.

This Australian expansion by NZX comes nearly a decade after merger talks between the Australian Stock Exchange (ASX) and New Zealand Stock Exchange (NZSE) failed and after retiring ASX chairman Maurice Newman called the New Zealand market "internationally irrelevant".

NZSE demutalised, was renamed NZX, listed on the market it operates and under chief executive Mark Weldon expanded into new areas of business.

"The completion of the deal, if successful, will represent an important step forward for both organisations and for the capital markets on both sides of the Tasman," said Mr Weldon and NSX chairman Michael Costello.

NZX had a growth plan which could be executed at a low marginal cost and which would materially grow the value of NSX, Mr Weldon said.

The New Zealand market operator is expected to expand NSX by introducing New Zealand listings and also facilitate a listed debt market.

NSX currently has more than 110 company listings and operates a taxi licence trading and water trading market.

NZX said it would buy 78.5 million new NSX shares at 15 Australian cents each in a deal recommended by the NSX board.

The A$11.78 ($15) million will be funded by a mixture of equity and debt. Analysts expect NZX to raise as much as $30m to fund this and other purchases.

The move is subject to the approval NSX shareholders, 75 per cent of whom have to vote to repeal a clause in the company's constitution that prevents a person having voting power in excess of 15 per cent. An extraordinary meeting is expected in June.

NSX reported a loss of A$12.58m in the six months to December 31 when it had cash balances of A$5.9m. The revenue in the six month period was A$1.1m. NSX had a market capitalisation of A$11.9m at that time.

If the deal announced today goes through NZX will have a majority of directors on the board of NSX and a majority of the shares.

NSX listed on the ASX in January 2005 and is regulated by the Australian Securities and Investments Commission (ASIC).

NSX targets small, high growth businesses. Australia has five licensed exchanges. Two of are held by NSX - the National Stock Exchange of Australia and the Bendigo Stock Exchange.

- NZPA