MercoPress. South Atlantic News Agency

London and Toronto tie-up plan to create world’s largest mining and energy stock market

London Stock Exchange chief executive Xavier Rolet (Photo AFP)

The London Stock Exchange is to buy Canada's TMX to claw back lost market share and create the world's fourth-largest bourse trading 4.1 trillion US dollars of stock a year.

Shares in the LSE, first established in 1698, jumped 9% as markets welcomed the all-share deal, and indicating a per share valuation for TMX of C$46.7, up 16 percent.

The deal would create the No. 1 global centre of mining and energy stock trading and values the Toronto group at about $3.2 billion.

If the combination survives likely political opposition in Canada, it will create a group with a market value of 4.3 billion pounds (6.9 billion) based on Tuesday's prices with LSE shareholders holding 55% and TMX shareholders getting a 6% premium.

“The deal looks like a defensive looking merger of equals driven by competitive pressures ... and geographical constraints i.e. the need to attract more international business,” said Oriel Securities in a research note.

With Xavier Rolet at the helm, the LSE is fighting to win back market share lost to upstart rivals after Europe opened markets in 2007 to challenge incumbent exchanges that had long been protected behind national boundaries.

The LSE expects cost savings of 35 million pounds per year from the deal and benefits to sales of the same magnitude in the third year though cross-selling, easier access for customers, and the wider availability of products.

Shareholders in TMX Group will receive 2.9963 LSE shares for each TMX share and the combined group will be headed up by Rolet from London. TMX finance chief Michael Ptasznik will be chief financial officer of the new group, based in Toronto.