TMX gets set to file proposal on takeover by LSE

By Solarina Ho

TORONTO (Reuters) – TMX Group Inc (X.TO: Quote, Profile, Research), owner of the Toronto Stock Exchange, will put forward a formal submission to Canadian regulators in the “coming weeks” regarding its proposed takeover by London Stock Exchange (LSE.L: Quote, Profile, Research), TMX Chief Executive Tom Kloet said on Monday.

Addressing business leaders in Toronto, Kloet said a shareholder vote on the deal can be expected by midsummer.

“In the coming weeks, we will submit our formal merger proposal to the various regulatory authorities in Canada for their consideration,” Kloet said. “In that proposal, we will outline the many benefits we believe this merger will bring to Canada, to our financial sector, and to the cities in which we operate.”

When pressed by reporters after his speech, Kloet declined to be specific about when the proposal will be filed.

The LSE’s proposed C$3 billion ($3.1 billion) takeover of TMX would create a $7 billion transatlantic exchange doing $4 trillion in annual trading.

But the deal has drawn criticism from some political corners in Canada and from some of the country’s big banks, which argue it would hurt Canada’s influence on the global stage, weaken Toronto’s status as a financial center, and harm Canadian businesses, concerns disputed by Kloet.

Toronto-Dominion Bank (TD.TO: Quote, Profile, Research) and National Bank of Canada (NA.TO: Quote, Profile, Research) have opposed the deal, while Canadian Imperial Bank of Commerce (CM.TO: Quote, Profile, Research) and Bank of Nova Scotia (BNS.TO: Quote, Profile, Research) have expressed differing levels of concern.

Royal Bank of Canada (RY.TO: Quote, Profile, Research) and Bank of Montreal (BMO.TO: Quote, Profile, Research), which are advising on the deal, support it.

Kloet said on Monday the takeover would give more global investors access to Canadian marketplace, bring in more liquidity, and make it cheaper for issuers to raise capital.

“The broader reach we give our marketplace, the better it is for the issuers,” Kloet said.

He said the deal as proposed would give Canada permanent regulatory control and on-going leadership in the exchange.

The deal requires the approval of regulators at the Canadian provincial and federal levels. At the provincial level, the Ontario Securities Commission has veto power over the deal and other provinces will also have a say.

Federal officials must rule if the proposal is of “net benefit” to Canada.

The Ontario government is to release a report this week detailing its recommendations on the takeover.

The recommendations will not be legally binding, but if Ontario takes a strong stance, it will likely carry serious weight with securities regulators.

A majority of Ontario business executives from companies listed on the TSX or the TSX Venture Exchange backed the deal, according to a survey commissioned by TMX Group and released on Monday. [ID:nN04131685]


The merger frenzy gripping the world’s stock exchanges intensified last week when Nasdaq OMX (NDAQ.O: Quote, Profile, Research) and Intercontinental Exchange (ICE.N: Quote, Profile, Research) bid $11.3 billion for NYSE Euronext (NYX.N: Quote, Profile, Research).

Kloet would not “close the door” on future transactions, domestically or abroad involving TMX, but said the company’s focus was on the deal with the LSE, calling it the “most exciting opportunity” in front of TMX.

“We’re in a more and more competitive world — I would call it a hyper-competitive world — and it’s very important that we continue to evolve our organization in a way that makes sure we’re competitive globally,” he said.

(Reporting by Solarina Ho, additional writing by John McCrank; editing by Peter Galloway)

TMX gets set to file proposal on takeover by LSE