LSE holds firm on merger despite counter-bid
London Stock Exchange vowed to press ahead with a merger with its Toronto counterpart today, despite the emergence of a rival Canadian bidder.
Over the weekend, Maple Group, which is made up of Canadian pension funds and banks, tabled a £1.8bn (€2.06bn) bid proposal for the Toronto exchange (TMX) designed to keep the exchange in Canadian hands.
The LSE unveiled its own merger proposal with TMX in February as part of chief executive Xavier Rolet’s desire to play a central role in the consolidation of international stock exchanges.
It said it remained committed to the deal today: “The proposed merger offers compelling financial, strategic and operational benefits for shareholders, the full breadth of market participants, listed companies of all sizes, investors and other stakeholders.”
TMX has said it will assess the higher offer from Maple but that in the meantime it continued to back its existing merger partner.
The Maple bid is likely to have strong local support as politicians and banks in Canada have already voiced opposition to the LSE plan amid concerns its biggest exchange will be dominated by foreign interests.
But analysts say Maple also has some big hurdles to overcome. Its offer is said to be conditional on receiving the green light to merge the Toronto exchange with Alpha Group, a bank-owned share trading system.
Together, TMX and Alpha would account for more than 80% of the share trading market in Canada, which could make it difficult for the country’s competition authorities to grant approval.
Sealing the merger is seen as critical for the LSE to enable it to compete in a market where many of its rivals are joining forces to slash costs and attract the biggest company listings.
Shares in the LSE rose by 4% today on suggestions that a failure to complete the deal could make it susceptible to takeover. It rebuffed bids from Nasdaq and the NYSE in 2006, but its share price has never regained the highs seen then.
Germany’s Deutsche Borse agreed in February to buy NYSE Euronext, but the deal is subject to a counterbid from Nasdaq OMX and IntercontinentalExchange. And the Australian government recently blocked Singapore’s takeover bid for its bourse on national interest grounds.
The LSE’s deal with Canada’s TMX would create one of the world’s biggest trading platforms, with the new business becoming a dominant player for mining company listings at a time of strong commodity prices.
It is set to have its headquarters in both London and Toronto with LSE chief executive Xavier Rolet continuing in his current role for the merged group. While the combination has been presented as a merger of equals, existing LSE shareholders will hold 55% of the enlarged business.
On Friday, the LSE announced a profits rise of 65% to £268m (€307m) in the year to March.
