What does the TSX-LSE merge mean for Toronto?

What does the TSX-LSE merge mean for Toronto?

Big news on Bay Street this morning as the Toronto Stock Exchange (TSX) and London Stock Exchange (LSE)  announce merger plans, with the LSE holding the majority stake of the new entity (that we’re hoping is going to be called “TL-SEX”). So as Canada gets ready for its 145th anniversary next year, capital in the British capital will be calling the shots once more. It makes us all nostalgic for the bygone days, but there are actually more serious things to consider here. Below, a sampling of them.

From the National Post:

TMX, which operates the country’s largest exchanges in Toronto and Montreal, had confirmed the talks late Tuesday, characterizing the potential deal as “a possible merger of equals to create an international exchange leader.”

But the market value of the two is not equal. The LSE is larger, with about $3.87-billion in market value, while the Canadian exchanges are valued at about $2.99-billion. That means the shareholders of Britain’s national exchange would own more than the shareholders of this country’s biggest exchanges.

However, the newly-merged entity will have two head offices, one based in Toronto and the other in London, and the executive ranks will be evenly split. CEO Thomas Kloet said Wednesday morning there will be some melding of cultures required.

What does it mean for Toronto?

1) The possibility of wealthy, British-accented businessmen coming to town in larger numbers should alarm all bachelors. The threat posed by Jude Law-type bankers roaming our bars cannot be overstated.

2) This news either makes a national securities regulator vital or irrelevant, we’re not sure. David Olive in the Toronto Star argues that the new company will be effectively regulated under British rules, but with a Toronto co-headquarters surely there’s an argument for taking regulation out of provincial hands?

3) It will be marginally easier for Canadian businesses to get access to European money, and vice-versa. As Tom Caldwell told CBC’s Metro Morning today, it wasn’t that difficult to get euro-cash before but there’s bound to be some small but real gains here. European investors looking to throw money in to Canadian resources may drool a little. (London seems unimpressed so far.)

The biggest gains will go to the owners of the two stock exchanges, who will now be one of the world’s largest in terms of total value and number of stocks traded. Whether that means anything in a world where people are talking about “the end of the publicly traded company” is up to others to decide. All of this, of course, depends on whether the Canadian government—personified as always by Tony Clement—approves the deal.

• TMX, LSE finalize historic merger [National Post]
TMX, LSE aim to be ‘powerhouse’ [Globe and Mail]
• Olive: Toronto, London stock merger a dream for investors [Toronto Star]
Morning Meeting: Londoners dump on TMX-LSE merger [Globe and Mail]
• Call it what you like, but the LSE-TMX deal is a takeover [Globe and Mail]
• What hurdles will the deal face? [National Post]