London Stock Exchange Group PLC and TMX Group Inc, operator of the Toronto Stock Exchange to merge

The London Stock Exchange Group Plc and TMX Group Inc, operator of the Toronto Stock Exchange, are to merge the two bourses. The move is expected to result in one of the largest stock markets globally, announced the firms Wednesday. The deal will be an all-share merger, with headquarters and listings in both the UK and Canada.

The deal will see the London Stock Exchange hold a 55 per cent share of the new company and TMX will have 45 per cent. The merger will create the biggest exchange for mining and energy stocks globally. Both exchanges are heavily weighted with mining stocks. Whereas the firms did not approximate the value of the firm to be created, TMX Group is currently valued at $3 billion and the LSE Group at around $US3.25 billion.

The LSE is home to mining titans Rio Tinto PLC and Xstrata PLC. Toronto's exchange and its venture affiliate, the TSX Venture Exchange, are known as the preeminent places to raise capital for exploration, hosting about 1,900 energy and mining firms that raised about $29 billion in equity last year.

Xavier Rolet, LSE chief executive will be CEO of the new company, to be renamed LSEG-TMX, while TMX CEO Thomas Kloet will become president.

Commenting on the merger plans, TMX CEO Thomas Kloet, said Canadian customers will benefit from access to one of the world's deepest capital pools while European issuers will have an effective gateway to North American financial markets.

On his part however, Rolet, LSE chief executive, said the firms are keen on becoming a powerhouse in the global exchange business. The merger is expected to have the world's largest number of listing, more than 6,700 companies with an aggregate value of $US5.8 trillion, said the firms. LSEG-TMX is expected to garner yearly savings of £35 million by the second year of the merger.

The investment is still however subject to shareholder and other regulatory approvals. The deal will help both exchange operators accelerate their existing efforts to build up their derivatives operations in Europe and give London a small beachhead in U.S. options trading as a result of TMX's majority stake in the Boston Options Exchange.

LSE Group also owns Borsa Italiana in Milan, while TMX also operates the Montreal Exchange, the Natural Gas Exchange (NGX) in Calgary, the Boston Options Exchange and the TSX Venture Exchange in Calgary and Vancouver.

10 Feb 2011