• Home
• Financial Services
• News Article

London, Canadian bourses to merge

Thursday, Feb 10, 2011

Gulf News

Measure will dilute Dubai, Qatar shareholdings

Dubai: The mutually agreed merger between the London Stock Exchange and its Canadian counterpart, TMX, will dilute the shareholding of two major Gulf shareholders, Borse Dubai and Qatar Investment Authority ( QIA ).

The two bourses confirmed yesterday that they had agreed to merge, creating a global trading powerhouse, with more than 6,700 listed companies.

Currently Borse Dubai and Qatar Investment Authority , hold 20.6 and 15.1 per cent shares respectively in LSE. The all-share swap deal will see LSE investors own 55 per cent of the enlarged group, with TMX stockholders receiving 2.9963 LSE shares for every share held in the Toronto-based group.

Support

“We have been following these developments with interest. Borse Dubai has always been supportive of management initiatives to create shareholder value in the London Stock Exchange,” Borse Dubai said in a statement.

Borse Dubai acknowledged the potential dilution as a result of the merger, however it said: “We continue to support the management in their efforts to create both a stronger platform and a more valuable enterprise for stakeholders.”

The combined trans-Atlantic group (LSEG-TMX) will be jointly headquartered in London and Toronto.

Xavier Rolet, LSE’s chief executive, will remain in the top job at the new company.

“This is an incredibly exciting merger with considerable growth opportunities. We are creating the world’s largest listings venue for the commodities, energy and natural resources sectors, as well as the premium market for small, mid-size and growth companies,” said Rolet in a statement.

The merged group will be renamed after closing: however, operating exchanges will each continue under their existing names.

LSEG, a UK incorporated holding company, will continue to be the holding company of the merged group.

Cost synergies

LSEG-TMX will operate on common technology platforms and cost synergies and other transaction-related cost savings are estimated to be $56 million (Dh205.6 million).

The board of the new entity will consist of 15 directors, eight to be nominated by LSEG (of which it is envisaged three will be from Borsa Italiana), and seven to be nominated by TMX.

Wayne Fox will be the chairman of the board of the merged group, and Chris Gibson-Smith and Paolo Scaroni will be deputy chairmen.

There have been persistent suggestions that LSE’s two major shareholders, Borse Dubai and QIA would sell their stakes. However, until recently all these suggestions were denied by LSE. In a recent interview, Rolet told Gulf News that Borse Dubai is a long-term strategic investor and an early exit from LSE is unlikely.

Up ahead

It is anticipated that the relevant shareholders’ meetings of LSEG and TMX will take place in the second quarter of 2011 and Ontario court approval will be sought shortly after TMX’s shareholders approve the merger. Approval of this transaction is required under the Investment Canada Act. Canadian law allows the government to reject foreign takeovers that don’t provide a “net benefit” to the country. The merger may face opposition as the Canadian government reviews its foreign ownership rules after blocking a hostile takeover of Potash Corp of Saskatchewan Inc. The Ontario and Quebec securities regulators would also have to approve any sale of more than 10 per cent of the voting shares of TMX Group Inc.

By Babu Das Augustine, Deputy Business Editor

© Gulf News 2011. All rights reserved.