LSE, TMX merger to create massive trading platform

TORONTO – The London Stock Exchange is in advanced talks to take over the owner of the Toronto Stock Exchange, a deal that would create a major centre for trading mining shares if it overcomes likely political opposition in Canada.

The LSE and TMX Group said on Tuesday they were discussing the formation of a trans-Atlantic exchange operator with a market capitalisation of more than US$6,8 billion.It would instantly become the world’s premier venue for trading mining and energy shares, a business whose value has surged along with the boom in commodity prices.The talks come as the Singapore Exchange works to push through its proposed US$7,8 billion acquisition of Australian stock exchange operator ASX, a deal that has run into strong opposition in Australia.Likewise, an LSE-TSX deal might face hurdles in Canada, where foreign takeovers of high-profile companies have become a sensitive political issue.’Consolidation in exchanges is likely to continue because of globalisation,’ said Subodh Kumar, chief investment strategist at Kumar & Associates in Toronto. ‘The issue for European exchanges is how they can compete with the New York-based ones for these large pools of capital.’Some of the largest mining companies in the world are listed on LSE, while TSX boasts a stable of big gold companies, as well as huge numbers of junior miners listed on both the senior exchange and on the TMX-owned TSX Venture Exchange.Commodity prices have surged in the past year, driving up shares of resource players. TMX, which boasts a sizable oil and gas component, also owns a derivatives exchange headquartered in Montreal, the financial centre of the French-speaking province of Quebec.’For the London Stock Exchange it’s great. You get into commodities more,’ said Paul Ma, portfolio manager at McLean & Partners Wealth Management in Calgary.Even so, Ma thinks a deal would have less than a 50 per cent chance of passing muster with the Canadian government, which may face an election as early as this spring.Andre Cappon, president of CBM Group, a New York-based consultant for global exchanges, said the deal would give LSE a much-needed North American partner, and allow TMX to link up with a global partner without feeling swallowed by a US player.’It’s very logical for Canada to try to preserve its financial market while trying to be a global exchange. They wouldn’t want to be in bed with a US exchange that would overpower them,’ he said. TMX and LSE already have ties, having formed a strategic partnership involving their derivatives businesses in 2009. LSE rejected a bid from Nasdaq in 2007 at the height of the exchanges M&A boom, and has since suffered as European Union rules opened the door for private trading venues to eat into its core stock-trading base. The bourse now only handles about 60 per cent of trading in London-listed stocks. – Nampa-Reuters

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