London Stock Exchange (LON--LSE), the group that runs London's main stock exchanges, this morning acknowledged weekend reports that its proposed merger with Canada's TMX Group Inc. (OTC:TMXGF), now had a new player in the frame. A number of Canadian financial institutions, including pension funds and banks, operating under the name Maple Group, have put together a rival proposal to buy TMX, although the detail is still at an early stage. On Saturday, TMX confirmed that the new proposal, which is not binding and was prepared for discussion purposes, provides for a combination of cash and equity consideration stated to be at a premium to the current TMX share price. In February, LSE set out a deal in which TMX shareholders would receive 2.9963 LSE shares for each TMX share, with LSE shareholders retaining a 55% stake in the enlarged group. The deal has provoked concern among some Canadian regulators who want to see TMX stay in Canadian hands.
Responding today, LSE said it remained committed to the recommended merger but was not changing the terms of its offer. It insisted that the proposed deal "offers compelling financial, strategic and operational benefits for shareholders, the full breadth of market participants, listed companies of all sizes, investors and other stakeholders." In an effort to emphasise what it sees as a need for market operators to adopt an international focus – particularly in light of other M&A activity in the sector – LSE said the "outward-looking, highly international transatlantic group, jointly headquartered in London and Toronto, would be a global leader in capital formation, liquidity and exchange technology". It said the all-exchange merger was expected to have a direct positive impact on Canada, the UK and Italy, enhancing the position of each country amongst the global business community and driving economic growth.
In April Deutsche Börse, the operator of the Frankfurt stock exchange, confirmed it was pressing ahead with a deal to buy NYSE Euronext after the latter rejected a counter offer from Nasdaq OMX Group (NASDAQ:NDAQ). The Deutsche/NYSE deal has been sold to shareholders as an opportunity for the combined group to capitalise on "substantial strategic growth opportunities" in Asia, Latin America and other emerging markets.
Last month, LSE and TMX initiated the application process with Canadian federal and provincial authorities and LSE said it would continue to work with TMX towards the successful completion of the merger. Last Friday, LSE announced its preliminary results for the year ended 31 March 2011, which showed total income up 7% to £674.9m, adjusted operating profit up 22% to £341.1m and adjusted basic earnings per share up 23% to 73.7 pence. The London Stock Exchange Group share price gained 20.5p to 848p during the morning but remains some way off its 868.5p trading level at the beginning of May.