The operators of the Toronto and London stock exchanges announced their blockbuster marriage today, heralding what a force the combined company will be if the transaction clears all the shareholder and regulatory hurdles.
As a Globe and Mail columnist reported late yesterday, TMX Group Inc. and London Exchange Group PLC will together form the world’s premier market for resource companies. As our European correspondent Eric Reguly reports today in the wake of confirmation of the deal, the two bourses combined will have 6,700 listings, more than any other exchange in the world, with a collective market value among those companies of almost $6 trillion.
Notable in today’s announcement, and from the conference call in London, is the use of the term "merger of equals." Read that to mean they don’t want it called a takeover of TMX. As in, Canadians lost many of their resource companies to foreign takeovers, so please let’s not bill this a loss of the resource marketplace.
Which is it? It’s not as clear as these things normally are, but the bottom line is that the LSE is paying TMX stockholders 2.9963 LSE shares for each share they own. After the deal, the shareholders of the LSE will hold 55% of the merged company, and the LSE folks will hold eight of the 15 board seats.
The LSE also gets the chief executive position of the combined group -- current LSE CEO Xavier Rolet -- while the TMX gets the chairman’s seat. There will be co-headquarters, and there's no premium being paid. But, all in all, it sure smells like a takeover. Given the fuss over the successful takeovers of Canada’s big mining companies, and the blocked bid for Potash Corp. of Saskatchewan, how might this one play?
That’s not to say there may not be good strategic reasons for the deal, but at least let’s call it what it is. It’s certainly the way some see it today. Note this, for example, from today’s market commentary by Ben Critchley, a sales trader at IG Index in London: "The London Stock Exchange Group itself climbed 8.9% following an agreement to buy owners of the Toronto Stock Exchange, TMX Group, in an-all share merger valued at around $3.2 billion."
Why does it matter? We are extremely sensitive in Canada, and as a small economy, we should be. And if you can kill an unpopular $40-billion takeover of Potash, you can kill a "merger of equals" whose popularity has yet to be tested.
