London calling: TMX to merge with LSE

TMX Group, operator of the Toronto Stock Exchange, has announced that it will merge with the London Stock Exchange. The result would be a trans-Atlantic market with a dominant role in capital financing for the mining industry.

The spin off for Canadian investors is that the investing population of Britain — more than double that of Canada — would have easier, lower cost access to Canadian listings. That could mean a short-term bump-up in equity prices.

In terms of sheer number of listings, the combined exchange would be the largest in the world, with more than 6,700 issuers, with a combined market cap of about $5.8-trillion.

The deal will require a slew of regulatory approvals, though. Not only will it face scrutiny by the OSC, the AMF and Britain’s Financial Services Authority, but also Italian regulators, because the LSE owns the Milan bourse.

The post-merger company will be headed by Xavier Rolet, the CEO of the LSE. There will be a Canadian presence in the C-Suite, however, as Michael Ptasznik will continue in his role as chief financial officer.

Thomas Kloet, CEO of TMX Group, emphasized in a Wednesday morning press conference that Canada will benefit greatly from the merger.

“In structuring this deal, we looked carefully at the benefits it can bring to Canada’s capital markets,” he said. “As I’ve said many times, we take our responsibility as Canada’s central marketplace very seriously. It is a role we have played for almost 160 years and one we intend to continue to play for many decades to come.

“We have structured a model that opens up many opportunities for each of the key cities that we operate in today,” he explained. Toronto will be the co-headquarters for the new group, and become the global headquarters for the equity listings business for the entire group.

Montreal will be become the global hub for the new group’s derivatives business, “recognizing the unique capabilities and talent that has driven MX’s growth over the years,” Kloet said.

Calgary will become the global hub for the new group’s energy business, and along with Vancouver will remain co-headquarters for the TSX venture exchange, coordinating the new group’s global strategy in the small-cap and early stage financing sector.

“I firmly believe that for Canadians, today’s news represents significant opportunity—the opportunity for Canadian companies to tap the world’s largest international pool of capital; the opportunity for our markets to attract new listings in multiple markets; the opportunity to bring new global players as investors into our markets; and the opportunity to grow our capital markets internationally and as a result expand our domestic financial sector and its ecosystem,” Kloet added.

Xavier Rolet, CEO of London Stock Exchange Group, said the merger is “a good deal for Canada, and it’s a good deal for Europe in the sense that it connects two major capital markets and enhances their global reach.”