TMX Group Inc. plans to merge with London Stock Exchange PLC in a blockbuster deal that would bring together the world's premier mining markets.
The deal between TMX, which operates Canada's biggest exchanges, and LSE would be structured as a merger of equals. Together, the market value of the two is more than $6-billion.
TMX confirmed late Tuesday that it was in "advanced discussions" with LSE.
"Current discussions contemplate an exchange ratio close to the current market capitalization of London Stock Exchange Group PLC and TMX Group Inc.," it said after The Globe and Mail and British media outlets reported the deal.
TMX runs the Toronto and Venture exchanges, and the derivatives exchange in Montreal, among other businesses, and is heavy on resource listings. On London's benchmark FTSE 100, meanwhile, some 34 per cent of the listings are mining and energy companies.
"It's a logical merger in that it gets LSE into derivatives business, it puts together the two biggest resource exchanges on earth," said Tom Caldwell, the chairman and chief executive officer of Caldwell Securities Ltd. and an investor in both exchanges. "This is quite a unique organization now and it's very, very attractive. Who knows, you might see another merger after this."
Several global stock exchanges have merged in recent recent years. Just this month, for example, Singapore Exchange agreed to a $8.3-billion (U.S.) takeover of Australia's ASX Ltd. to create Asia's fourth-largest bourse, aiming to cut costs and fight growing competition.
The combined group, according to The Financial Times, would be the seventh-biggest exchange in the world. For mining listings, it would be the biggest on the globe,
The Financial Times said Xavier Rolet, the LSE chief executive officer, would head the new company. TMX chairman Wayne Fox would be chairman, and TMX CEO Thomas Kloet president.
Mr. Caldwell, who has long played a significant role in the bourse world, said that Mr. Kloet and Mr. Rolet know each other and that their teams know each other very well. "It's a great transatlantic combination," he said.
TMX said only that management would be drawn from both companies, and the merged group would be "co-headquartered" in Toronto and London.
The proposed deal has the backing of major LSE shareholders, Borse Dubai and the Qatar Investment Authority.
The deal also plays into the raging debate over a single securities regulator.
David MacDonald, CEO of Toronto-based technology distributor Softchoice Corp., said it underlines the need for such a sole regulator in place. "First and foremost we've got to get our own regulatory environment sorted out."
In the longer term, Mr. MacDonald said, the deal should be good for Canada because it could help attract more foreign investment to the Canadian markets and a "wider perspective" for Canadian stocks.
Currently, "liquidity on the Toronto exchange is a big problem," he said.
One concern, though, he added, is that the economic crisis showed that London's banking environment "got a little frenzied." He said he hopes "the conservative nature of our markets and our banking sector prevail over the aggressiveness of the U.K. banking environment, and [that aggressiveness] doesn't spill over to our exchange."
With files from reporter Richard Blackwell