LSE in merger talks with Canada’s TMX
2011-02-09 09:45:36
The combined group, which people close to the situation said would be worth £5.5bn ($8.8bn), would be the largest platform for mining company listings at a time of surging commodities prices.
It would also be the world’s largest exchange by numbers of companies traded.
The LSE would use its Toronto-listed secondary shares to acquire TMX, the people said.
The LSE and TMX put out a short statement citing advanced talks of a “merger of equals”, though they said they contemplated “an exchange ratio close to the market capitalisation”.
According to Thomson Reuters Datastream, LSE is valued at $3.9bn and TMX at $3bn, meaning LSE would account for 56 per cent of the merged group. It would be the world’s seventh-biggest exchange by market value.
The combined group would have a dual stock market listing and co-headquarters in London and Toronto. The two groups, which formed a strategic partnership in March 2009, were on Tuesday night finalising the details of a deal. Barring any last-minute hitches, a merger could be announced this week.
Mr Rolet would become chief executive of the merged group. Wayne Fox, chairman of TMX Group, would be chairman and Thomas Kloet, TMX chief executive, would be president.
Borse Dubai, LSE’s largest investor, Italian bank shareholders UniCredit and Intesa Sanpaolo, as well as Qatar Investment Authority, which owns 15 per cent of the LSE, favour the deal.
| Market value ($bn) | |
|---|---|
| 1. Hong Kong Exchanges & Clearing | 24.9 |
| 2. CME Group | 20.1 |
| 3. Deutsche Börse | 15.3 |
| 4. BMF Bovespa | 13.5 |
| 5. NYSE Euronext | 8.7 |
| 6. IntercontinentalExchange | 8.6 |
| 7. LSE/TMX | 6.9 |
Talks between the bourses have been taking place against a background of consolidation among exchanges in the face of lost market share to alternative trading platforms such as Chi-X Europe and Bats Europe.
SGX, Singapore’s exchange, agreed a $7.8bn bid to takeover Australia’s ASX in January, to form Asia’s fourth-biggest bourse. The deal valued ASX at 25 times its 2009 earnings. LSE trades at about 10 times earnings.
TMX shares have risen strongly on the back of consolidation hopes. The group’s subsidiaries include the Toronto Stock Exchange and the Montreal derivatives exchange.
TMX also has a 19.9 per cent stake in EDX London, a small derivatives exchange run by the LSE. In January, TMX opened an office in London – its first outside North America.
TMX markets itself as the world’s leading resources market, but the LSE has also capitalised on the commodities boom.
Mining and energy companies account for 34 per cent of the companies on LSE’s benchmark FTSE 100 index, up from 29 per cent three years ago.
TMX’s main board and TSX Ventures exchange, which specialises in small-cap listings, have a combined 3,900 listings between them.
The deal will require approval from both provincial and federal Canadian authorities, where there are restrictions on an entity owning more than 10 per cent of an exchange.