London, Toronto Exchanges Announce Merger

LONDON (AP) - The London Stock Exchange Group PLC and TMX Group Inc., which operates the Toronto Stock Exchange, are merging to create one of the world's largest stock markets, the companies announced Wednesday.

The deal will be an all-share merger, with headquarters and listings in both the U.K. and Canada. LSE shareholders will hold 55 percent of the new company and TNX will have 45 percent.

Both exchanges are heavily weighted with mining stocks and a combination would create the world's biggest exchange for mining and energy stocks.

The LSE exchange, founded in a London coffee house in 1698, has been looking to expand as borders open and technology accelerates the pace of change. It spent much of the first decade of the 21st century fighting off takeover attempts, and has been losing market share to new rivals such as Chi-X Europe, which claims a 28 percent share of trading in blue chip shares on London's FTSE-100 index.

Competition from nimble startups inspired LSE's purchase of Sri Lankan tech company MillenniumIT in 2009 to update the London trading platform.

TMX and LSE did not estimate the size of the new group, but TMX Group is currently valued at $3 billion and the London group at around $3.25 billion.

LSE shares were up 7 percent at 953 pence as trading opened in London. TMX shares were up 3.7 percent at 1529 GMT, drifting lower from earlier highs.

LSE Chief Executive Xavier Rolet will be CEO of the new company, LSEG-TMX, while TMX CEO Thomas Kloet will become president.

"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," Kloet said.

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

The combination will have the world's largest number of listing, more than 6,700 companies with an aggregate value of $5.8 trillion, the partners said. They expect to realize annual savings of 35 million pounds ($56 million) by the second year of the merger.

For the year ending Sept. 30, the London exchange reported revenues of $1.03 billion while TMX report $636 million.

The companies expect to seek shareholder approval in the second quarter, with completion in the second half subject to regulatory clearance.

LSE Group also owns Borsa Italiana in Milan, while TMX also operates the Montreal Exchange, the Natural Gas Exchange (NGX) in Calgary, the Boston Options Exchange and the TSX Venture Exchange in Calgary and Vancouver.

Borse Dubai, the state-owned company that operates Dubai's stock exchanges and holds a 20 percent stake in the LSE, endorsed the TMX deal.

"Borse Dubai has always been supportive of management initiatives to create shareholder value in the London Stock Exchange," the company said.  "We continue to support the management in their efforts to create both a stronger platform and a more valuable enterprise for stakeholders."

In 2000, the LSE and Deutsche Boerse announced plans to merge, but the Germans pulled out after Sweden's OM Exchange made a hostile bid. That was rebuffed, as was a later offer from Deutsche Boerse in 2004.

The next year, the LSE fought off a bid from Macquarrie Bank of Australia and in 2006 the London exchange also fended off a bid from Nasdaq Market Inc.

The LSE's then made its own acquisition, buying Milan-based Borsa Italiana in 2007.

In 2007, NYSE acquired Euronext, operator of the Paris, Amsterdam, Lisbon and Brussels exchanges. NYSE Euronext formed not only the first trans-Atlantic financial market, but the world's largest at the time. And in the same year, Nasdaq bought Nordic exchange operator OMX AB.

In October, the Singapore Exchange Ltd. said it would buy Australian counterpart ASX Ltd. for $8.3 billion in a merger of Asia's second-and third-largest trading operators. ___

Rob Gillies in Toronto contributed to this report.