LSE to Acquire Canada Based TMX Group for $3.2 Billion

Arjun Dave
09 Feb, 2011
New York City

London Stock Exchange Group Plc agreed to acquire Toronto based TMX Group for $3.2 billion. Intense competition for stock trading and heavy technology cost brought two distant exchanges together.

[R]8:00 AM New York – London Stock Exchange Group Plc agreed to acquire Toronto based TMX Group for $3.2 billion. Intense competition for stock trading and heavy technology cost brought two distant exchanges together.[/R]

London Stock Exchange Group Plc soared more than 9% after it agreed to acquire Toronto based TMX Group in all-share transaction that valued the bourse at C$3.2 billion.

LSE and other exchanges in North America have been losing business to other private trading pools and non-exchange trading platforms.

Trading in stocks on London exchange has been on a steady decline and accelerated in the last two years. LSE said in the last quarter its share of equity trading declined to 63.8% from 75% only two years ago and The Toronto Stock Exchange share declined to 64% in December from 95% according to regulatory filing.

LSE shareholders will control 55% of newly merged group and TNX shareholders will control 45%.

In a Regulatory News Service filing the exchange said TMX shareholders will receive 2.9963 LSE shares for each share held in TMX Group valuing the Canada based exchange at C42.68 a share.

LSE acquired Sri Lanka based Millennium Technologies for its platform trading technology that allowed traders to complete trading close to 2 milliseconds.

The race to provide faster execution and diversify away from the stock trading to derivatives and futures has also brought other exchanges together. Australia and Singapore are close to merging their operations.

NYSE Euronex, Deutsche Boerse AG and Nasdaq OMX also have been aggressively expanding their tentacles across the globe in search for more trading volume and also spread its heavy technology costs.

The LSE and TMX already use the same technology platform to trade derivatives which was developed by Montreal exchange operated by the Toronto exchange.

The proposed ‘merger’ between the two exchanges will be the largest acquisition of a Canadian company in financial services in Canada and needs approval from federal government.