Monday 11 December 2017

Transatlantic takeover: LSE to buy Canada's exchange

Luke Jeffs and Paul Hoskins

THE London Stock Exchange has agreed to buy Canada's stock market operator TMX, while Germany's Deutsche Boerse is in talks to buy NYSE Euronext, signalling that exchanges globally are looking to consolidate.

The combined LSE and TMX would be the world's fourth-largest exchange and a top centre for trading mining and energy shares, with $4.1 trillion of stock changing hands each year. The exchanges are looking to regain market share lost to electronic trading platforms.

Sources said New York Stock Exchange operator NYSE Euronext is in talks to sell itself to Germany's Deutsche Boerse. A deal would allow them to cut costs and dominate exchange trading in continental Europe.

LSE shares rose 9pc after the TMX deal was announced. This suggests LSE could be getting a good deal, which in turn could allow another buyer to offer a higher price for TMX.

If the deal survives likely political opposition in Canada, a group will emerge with a market value of £4.3 billion (€5.4 billion) based on Tuesday's prices, with LSE shareholders holding 55pc.

The deal indicates a valuation for TMX of C$46.7 per share, a 16pc premium to its Tuesday close.

With Xavier Rolet at the helm, the LSE is fighting to win back market share lost to upstart rivals after Europe opened up the markets in 2007.

The new merger will put extra pressure on the bourses to seek partnerships to counter the threat from bigger rivals, with particular pressure on the Deutsche Boerse, though the remaining independent stock exchanges are scarce.

"The big question in Europe is what about Deutsche Boerse," said a London-based banker, speaking on condition of anonymity.

The LSE's share of UK equity trading so far this month has been 54.9pc, compared with 96.3pc in February 2008, according to Thomson Reuters data.

New entrants like BATS and Chi-X are rapidly gaining clout.

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