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Duncan says he won't interfere with TMX-LSE deal

Ontario Finance Minister Dwight Duncan.

Peter Power/The Globe and Mail/Peter Power/The Globe and Mail

Ontario Finance Minister Dwight Duncan has assured the British government that he will not allow politics to interfere with a proposed deal to merge the holding companies of the London and Toronto stock exchanges if it gets the go-ahead from Investment Canada, securities regulators and shareholders.

Mr. Duncan, who has emerged as the chief obstacle to the proposed merger between TMX Group Inc. and the London Stock Exchange Group PLC, delivered the conciliatory message on Monday when he met privately with a senior official in British Prime Minister David Cameron's government and Canada's High Commissioner to Britain, James Wright.

According to an internal British government briefing document obtained by The Globe and Mail, James Sassoon, Commercial Secretary to the Treasury, asked for assurances that Ontario would not block the proposed merger if Investment Canada approves it.

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"I said our government would not strictly kill a deal with the LSE on purely political grounds, that there are regulatory hurdles," Mr. Duncan said in a telephone interview from London, where he is on a road trip selling Ontario bonds to international investors.

There is some question as to whether Ontario has the power to block the deal on its own. Nevertheless, Mr. Duncan's vocal reservations about whether it makes sense for Canada's premier stock exchange to join forces with an overseas partner have made stock exchange officials nervous. The U.K. government strongly supports the LSE bid, according to a source close to the situation.

Lord Sassoon told Mr. Duncan he was "encouraged by the message that the decisions would be left to shareholders, the market and Investment Canada," the briefing document says.

TMX announced last Friday that its board of directors is sticking with the proposal to merge with the LSE Group and rejecting a $3.6-billion counterproposal from a group of nine Canadian banks and pension funds.

During the meeting and in a luncheon speech on Tuesday to the Canada-U.K. Chamber of Commerce, Mr. Duncan said he made no secret of the fact that he welcomes the so-called Maple bid launched by the banks. He said he was taken aback by the level of interest among British investors in the LSE/TMX merger proposal.

He told his audience that the Maple bid faces its own regulatory hurdles because it would lead to the bank-led group controlling more than 80 per cent of share trading in Canada and may be deemed anti-competitive.

"We welcome the fact that Canadians can lead in the world, and we look forward to both of these bids being assessed by appropriate regulatory authorities," he said in the interview.

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About the Author

Karen Howlett is a national reporter based in Toronto. She returned to the newsroom in 2013 after covering Ontario politics at The Globe’s Queen’s Park bureau for seven years. Prior to that, she worked in the paper’s Vancouver bureau and in The Report on Business, where she covered a variety of beats, including financial services and securities regulation. More

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