Toronto stock exchange kills merger deal with London

The Toronto Stock exchange (TSE) has terminated its proposed merger with the London Stock Exchange as two-thirds of its shareholders didn’t back the $3.7 billion merger agreement.

In a statement here, the TMX Group, which owns the Toronto exchange, said only 54 percent of its shareholders who had voted by proxy before Wednesday’s deadline supported the deal, falling short of the two-thirds required in a vote scheduled for Thursday.

The two stock exchanges had announced in February to merge to create a new global mega-bourse with offices in Toronto and London for trading stocks, derivatives and other financial assets.

But the merger proposal made Canadian banks, pension funds and the government of Ontario province (whose capital is Toronto) jittery as they feared that the merger could dilute Toronto’s importance as a major market and banking centre in North America.

The banks and pension funds banded together under the Maple Group and launched a hostile bid for the Toronto Stock Exchange (TSE) in May. But the stock exchange rejected their bid and set June 30 for shareholders’ annual meeting to decide the merger issue.

But now for terminating the merger agreement, the Toronto exchange will pay a $10 million expense fee to the London bourse.

As required by the agreement, the Toronto exchange will also pay a further $29 million fee to the London stock exchange if it accepts acquisition proposal by the rival Maple Group whose bid soured the merger deal.

In London, Xavier Rolet, chief executive officer of the London Stock Exchange Group (LSEG), said, “We are clearly disappointed that, despite a majority of both LSEG and TMX Group shareholders voting for our recommended merger, the two-thirds approval threshold for TMX Group shareholders was not met and hence the merger will now not proceed.

“We believe the merger would have been a unique opportunity for TMX Group shareholders to be partners in a truly international group, co-located in Toronto and London, focused on growth and opportunity.”

The 150-year-old Toronto Stock Exchange is the biggest resource (energy and mining) leader, with about 1,500 companies listed on it.