ASX has Link Market Services in its sights

Is the ASX over-reaching in its quest for growth?

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ASX Limited (ASX: ASX) has confirmed a report in today's Australian Financial Review that it is considering buying Link Market Services (Link) from private equity firm Pacific Equity Partners (PEP). Link provides share registry services and other share related services for over 1,000 ASX listed securities.

PEP is understood to want more than $1 billion for the business, and is also selling a 25% stake in American Stock Transfer & Trust Company (AST), with an option to buy another 25%. It's unclear whether ASX would also want to buy the 25% stake in AST as well as buying Link.

Registry services

Computershare Limited (ASX: CPU), Advanced Share Registry Services (ASX: ASW), Security Transfer Registrars and Boardroom Pty Limited are the main providers of share registry services in Australia. Computershare leads the market with 60% of the ASX 50/ASX200 listed companies. The company's recent purchase of Shareowner Services in the US gives Computershare a combined 73% of the stocks listed on the Dow Jones Industrial Index, and 66% of stocks in the S&P 500 Index. It's unlikely that Computershare would make a bid for Link, as the bid would probably invoke the ire of Australia's Competition and Consumer Commission.

ASX Growth pains

Since the merger with the Singapore Stock Exchange was kyboshed by the Federal treasurer in April 2011, the ASX has been on the lookout for ways to increase its growth, including increasing limits of capital raisings for junior listed stocks. That proposal has met a hostile reception from many parts of the market, including The Motley Fool, on the grounds that it was likely to disadvantage retail investors.

To fund the purchase of Link, ASX would need to raise capital either through an equity raising or debt. As the ASX doesn't have any share registry services at present, I can't really see any synergy benefits from the purchase of Link. And at a price of over $1 billion for Link, which is reported to make about $100m in Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA), appears very expensive.

Not happy, Jan

As an ASX shareholder, some of the moves the ASX is currently making are starting to worry me, and it increasingly appears that the company is going to make some sort of 'diworsification'.  I'll be looking to sell my ASX shares, once the Motley Fool trading policy allows me.

If you're in the market for some high yielding ASX shares, look no further than Secure Your Future with 3 Rock-Solid Dividend Stocks. In this free report, we've put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

More reading

Motley Fool contributor Mike King owns shares in ASX. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »