TSX operator mulls merger with London exchange
The TMX Group, operator of the Toronto Stock Exchange and the Toronto Venture exchange, confirmed Tuesday it is in advanced talks with the London Stock Exchange Group on a possible merger.
A spokeswoman for the TMX Group said the companies are considering a deal that would be a merger of equals. The TMX Group is valued at $2.99 billion, while the London group's value is around $3.25 billion.
Shares in TMX were halted Tuesday.
The TMX Group said executives in the new company would be taken from senior leadership at both companies and be co-headquartered in Toronto and London.
A report in the Financial Times earlier Tuesday said the deal would make the new exchange group the world’s seventh-biggest exchange.
Tom Caldwell, the chairman of Caldwell Financial and a past governor of the Toronto Stock Exchange, welcomed the news of a possible union.
A merger would give a listed company in Toronto access to an easy market listing in London, he said on CBC's TheLang & O'Leary Exchange.
"That would be really outstanding because I could bring in more investors from Europe, the Middle East, et cetera."
Caldwell also said the deal would enable London to get into the derivatives business.
A merger between the exchanger operators would likely require Canadian government approval to proceed.
"Should these discussions result in a concrete investment proposal, I and my officials will look at how the Investment Canada Act applies," Industry Minister Tony Clement said in a statement.
MPs had mixed reactions to the news on CBC's Power & Politics with Evan Solomon.
Foreign ownership concerns
The NDP's Thomas Mulcair raised concerns about foreign ownership of the country's two biggest exchanges.
"We never thought we'd be selling out both to a foreign power," he said. "We're seeing our stock exchanges being sold to foreign interests … it's an extremely shocking development."
Liberal finance critic Scott Brison called the possible deal an important development adding that the Toronto Stock Exchange is already a global market and an important source of financing for international sectors such as mining.
Conservative MP Shelley Glover called the deal interesting and said she'd wait to see more details Wednesday.
British media reports said LSE shareholders would hold just over 50 per cent of the combined company and that LSE chief executive Xavier Rolet was expected to lead the new firm while Wayne Fox, chairman of TMX Group, would be chairman. Thomas Kloet, TMX chief executive, would be president.
Both the TSX and the LSE are heavily weighted in mining and energy companies.
"If you are in the mining [or] oil and gas business, you would want to be listed on one of these exchanges," Caldwell said.
TMX Group operates the TSX Venture Exchange, the Montreal Exchange and the Natural Gas Exchange. It also owns Shorcan Brokers Ltd., a fixed income inter-dealer broker, Equicom, an investor relations subsidiary, and a majority stake in the Boston Options Exchange.
In addition to the London trading market, London Stock Exchange Group operates the Italian stock exchange Borsa Italiana and has a stake in FTSE International Ltd., which manages over 100,000 equity, bond and hedge fund indices.
With files from The Canadian Press