It’s a crafty move, but it’s not clear whether it’s the buyer or the seller being the craftier:
London Stock Exchange Group Plc, the 210-year-old bourse operator, agreed to buy Toronto Stock Exchange owner TMX Group Inc. for about C$3.2 billion ($3.2 billion) in stock as the companies cut costs to counter lost market share. LSE surged to a two-year high.
LSE shareholders will own 55 percent of the company, while TMX investors will hold the rest, the exchanges said today in a statement. TMX shareholders will receive 2.9963 LSE shares for each they own, valuing the Toronto-based company at about C$42.68 a share, 6 percent more than yesterday’s closing price.
Xavier Rolet, LSE’s chief executive officer, will reduce 35 million pounds ($56 million) a year in costs and expand into new businesses such as derivatives as competition from alternative trading platforms increases as do mergers among rivals. His predecessor Clara Furse fought off five takeover offers in two years and bought the operator of the Milan stock exchange. The LSE’s share of U.K. equity trading was 63.8 percent last quarter, compared with 75 percent in 2009, data from the London- based company show.
It could be a way for London to diminish the impact of European rules on their business (by having a non-EU place to land if necessary) or it could be a way for the EU to extend their rule-making to the Canadian market. Or, and this is the least believable scenario, it might just be an ordinary acquisition by a company that happens to run stock markets.
Update: What is presented as a take over in other markets is being positioned (spun?) as a “merger” for domestic consumption:
TMX Group, which operates the Toronto Stock Exchange, and the London Stock Exchange announced Wednesday they are merging to create one of the world’s largest stock exchanges.
The merger, which is subject to regulatory approvals, is unanimously being recommended by the boards of both exchanges.
The merger, if approved, would give the new firm a value of just over $6 billion (Cdn.) and give LSE shareholders just over 50 per cent of the combined company.
TMX Group is valued at $2.99 billion, while the London Stock Exchange Group’s value is slightly higher, around $3.25 billion.
The new company will have the world’s largest number of listing, more than 6,700 companies with an aggregate value of $5.8 trillion, the partners said in a statement early Wednesday.
[. . .]
The company will be co-headquartered in Toronto and London with Xavier Rolet, the CEO of the London Exchange, retaining that position with the new company. The president will be Thomas Kloet, the CEO of TMX. The FO will be Michael Ptasznik, who currently holds the same post with TMX, and the company director will be Raffaele Jerusalmi, the Milan-based CEO of Borsa Italiana.
Expect this deal, even if it eventually gets regulatory approval, to drag on for most of this year.
