LSE calls the banns on £4.5bn marriage to Canada's TMX

The London Stock Exchange yesterday unveiled a £4.5 billion marriage with Canada's TMX in a move that will create one of the world's biggest share trading platforms.

The LSE's tie-up with the company that runs the Toronto Stock Exchange also makes the new business a dominant player for mining and energy stocks at a time of surging commodity prices.

It will have its headquarters split between London and Toronto, and LSE chief executive Xavier Rolet will continue in the role for the merged group, based in London. TMX finance chief Michael Ptasznik will be chief financial officer, based in Toronto.

LSE shareholders will hold 55 per cent of the new transatlantic giant, while the companies expect to realise annual savings of 35 million by the second year.

Oriel Securities said in a research note: "The deal looks like a defensive looking merger of equals driven by competitive pressures and geographical constraints, i.e. the need to attract more international business."

Rolet said: "We are aiming at nothing less than becoming a true powerhouse in the global exchange business."

Bankers said the chance of a rival bidder emerging for TMX was slim. "You would need to put a cash bid on the table and a premium, which might require cuts at TMX and the Canadian regulators would not like that one bit," one banker said.

Foreign takeovers in Canada have become a sensitive political issue since the government blocked BHP Billiton's $39bn (24bn) bid for Potash Corp.

Analysts also said the takeover could trigger further exchange mergers, with NYSE Euronext confirming last night it was in advanced talks with Deutsche Borse, the German exchange that is a former rejected suitor of the LSE.

After fending off other unsolicited suitors such as Euronext, Nasdaq and Macquarie Group of Australia in the past decade, the LSE merged with Borsa Italiana in 2007 before yesterday's consolidation move.

Markets welcomed the all-share transaction that would create the world's fourth-largest exchange, with some $4.1 trillion of stock changing hands a year.

The LSE's shares closed up 3.1 per cent at 920p after initially jumping 9 per cent on confirmation of the deal.

Analysts said the deal indicated a valuation for TMX of C$46.70 per share, 16 per cent up from the Toronto group's Tuesday close. Shareholders in TMX Group will receive 2.9963 LSE shares for each TMX share.

The LSE/TMX merger synergies are expected to partly come through cross-selling, easier access for customers, and the wider availability of products.

It is understood the London exchange's big shareholders are backing the deal, including Borse Dubai, which holds 20 per cent, and the Qatar Investment Authority, with 15 per cent.

The consolidation move comes as the Singapore Exchange's plans for the $7.8bn acquisition of Australian counterpart ASX has run into strong political opposition Down Under.