The London Stock Exchange has agreed
to an all-share merger with TMX Group, operator of Canada’s largest stock exchange,
creating a platform with the world’s largest number of mining company listings
at a time of surging commodity prices.
The deal is the first big strategic
move by Xavier Rolet, chief executive who took over from Clara Furse in 2009,
to secure the future of the UK bourse.
There were signs that some analysts
were lukewarm on the deal.
Citi described the deal as
“defensive” and said it would distract the management from its
earlier stated strategy.
“We worry that this deal looks
likely to take up management time and energy in the short term.
We see this putting the LSE’s
existing growth strategies on the backburner, which we view as a
negative,” the bank said in a note.
The combined group, which will have
a dual stock market listing and be jointly headquartered in London and Toronto,
will be worth just under $7.7 billion including debt.
It will have a combined 6,700 listings,
making it the world’s largest exchange by numbers of companies traded.
The deal, which requires the
approval from both provincial and federal Canadian authorities, where there are
restrictions on an entity owning more than 10 per cent of an exchange, is
expected to be earnings accretive for both LSE and TMX shareholders in the
first full year following its completion.
The companies are targeting annual
cost savings of $56.2 million by the end of the second year of merger and a
revenue boost of $56.4 million in the third year of the combination growing to $160
million in the fifth year.
The deal is the latest in the
sector which faces the growing threat of competition from alternative trading
platforms such as Chi-X Europe and Bats Europe.