We use the last version ARAXIS v6.5 and this is our native.properties setup (for the merge you need to call "compare.exe" with the "/merge" option and not the "merge.exe"
# Use default diff/merge tool
USE_DEFAULTS=0
# Sample customization settings for diff/merge tools for all file extensions
MERGE_TOOL="C:\\Program Files\\Araxis\\Araxis Merge v6.5\\Compare.exe"
MERGE_PARAMS = /wait /merge /a1 /3 "%a" "%d1" "%d2" "%t"
DIFF_TOOL="C:\\Program Files\\Araxis\\Araxis Merge v6.5\\Compare.exe"
DIFF_PARAMS= /wait /a1 "%a" "%d1" "%d2"