LSE and TMX of Canada

LSE and TMX of Canada merger

First of all, it is worth to define merger.  Merger is defined as “combining of two business entities under common ownership.” (Arnold, 2008 , p865) The merger for the London Stock Exchange (LSE) and TMX Group is called horizontal (Arnold, 2008).  Horizontal merger is where the companies are engaged in similar line of activity (Arnold, 2008, p 865).

The London Stock Exchange (LSE) has agreed a merger with TMX Group, which operates the Toronto Stock Exchange. The headquarters are going to be kept in both London and Toronto.  The merger has become the world's largest exchange for mining companies. More than 6,700 companies will be listed on the combined exchanges, with a market capitalisation of about £3.7 trillion ($5.9tn). While the process of merger is going on the shares in the LSE climbed sharply to close up 3.1%.

As stated by LSEs’ chief executive Xavier Rolet "it was an incredibly exciting merger with considerable growth opportunities". He added "We are creating the world's largest listings venue for the commodities, energy and natural resources sectors, as well as the premium market for small, mid-size and growth companies."

On the other hand, the TMX's chief executive Thomas Kloet said “We are creating an international group with deep expertise, undeniable leadership in key sectors and the ability to compete and win on the global stage."  He emphasised on effectiveness of the merge by saying "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."

The world's biggest mining companies are on the LSE, and some of the world's biggest gold companies, and hundreds if not thousands of smaller mining companies are in the TMX Group.

There is a rise among the shares of stock exchanges around the world (Armitstead, 2011). For example, In America, shares in the Chicago Board Options Exchange raised to 12pc while Nasdaq and Spain's BMX also rose. (Armitstead, 2011)

The LSE proposed, share merger (£4.3bn) with Toronto's exchange would achieve £35m cost savings in a year and £100m in five years. This deal has become the fourth biggest exchange group in the world.  Although Mr Rolet had secured the backing of the LSE's biggest investors from Dubai and Qatar, however, the LSE will control 55pc to TMX's 45pc.

Raymond Bachand, Quebec's finance minister, in Canada, stated that they will take their time to study the details of this transaction to be sure that this meets Quebec's economic needs. We need to assure that access to capital is maintained for Quebec businesses.

Britain and Canada have different laws and different currencies.  Moreover, the two companies need to address the competition and rival among them. For example, the move of merger has reached other companies such as Deutsche Borse and NYSE Euronext.  There is an economic uncertainties and no one can predict the future of the stock exchange.