London Stock Exchange in merger deal

THE LONDON Stock Exchange (LSE) has agreed a merger with Canada’s TMX Group to create one of the world’s biggest market platforms.

The merged company will have a market capitalisation of £4.3bn, making it the seventh-biggest exchange in the world and the largest in terms of number of companies listed.

The London Stock Exchange has a secondary share listing in Toronto, which it could use to acquire TMX.

The deal is the first major strategic move made by chief executive Xavier Rolet, who is battling to restore the LSE to its former glory, and creates a mining and resources-dominant exchange at a time of surging commodity prices and unprecedented exploration activity.

Some of the largest mining companies in the world are listed on the LSE, whilst the Canadian bourse’s TSX exchange hosts several of the largest gold miners.

The combined group will be co-headquartered in London and Toronto and would continue to be overseen by regulators in both countries.

Rolet, who joined the LSE two years ago, is poised to take the reigns of the merged bourse.

TMX chairman Wayne Fox would become chairman of the new entity, whilst the Toronto-based exchange’s chief executive Thomas Kloet would be president.

Backers of the LSE are expected to support the merger.

Bourse Dubai, the London exchange’s largest shareholder with a 20 per cent stake, as well as Italian banks UniCredit and Intesa Sanpaolo are in favour of the deal. The Qatar Investment Authority, which holds a 15 per cent stake in the LSE, also backs the plans.

TMX Group operates three bourses; Toronto Stock Exchange, the Montreal Exchange and the Calgary-based TSX Venture Exchange, together valued at C$2.97bn (£1.86bn).

The LSE is valued at £2.4bn, based on last night’s closing share price of 892p per share. Shareholders in LSE would take 56 per cent of the combined unit, which would become the second biggest exchange for shares traded and would overtake the Nasdaq in terms of annual revenue.

The deal comes as exchanges worldwide attempt to consolidate in the face of increasing competition from alternative trading platforms such as Bats and Chi-X Europe.

Singapore exchange SGX last month agreed a $7.8bn (£4.8bn) takeover approach for Australia’s ASX, creating Asia’s fourth-largest stock exchange.

In 2007, an early wave of consolidation saw the New York Stock Exchange buy pan-European trading platform Euronext, Nasdaq buy OMX and Deutsche Borse buy the International Securities Exchange.

The London Stock Exchange has faced a number of takeover approaches in recent years from foreign bourses, including German exchange Deutsche Borse in 2004, Australia’s Macquarie in 2005 and Nasdaq in 2006.

The deal, which will require approval from the Canadian authorities, will see the group co-headquartered in London and Toronto.