Blogs & Comment

TMX-LSE merger at a crossroads

The LSE-TMX merger does not look like a done deal. Could a higher bid be coming for TMX shareholders?

(Norm Betts/Bloomberg via Getty Images)

A few weeks ago, I found a giant envelope crammed into my mailbox. After a good tussle, it finally came lose. Inside was the management information circular for the proposed merger involving the TMX Group Inc. and the London Stock Exchange Group.

The first page beckons shareholders to “RECORD YOUR VOTE IMMEDIATELY” (their caps and underscoring) via fax, 800-number or website I’ll be voting against. I would like to get a better price, for one thing.

I don’t think the LSE-TMX merger will get the required 2/3 majority of TMX votes at the shareholder’s meeting on June 30, anyways. Anecdotal evidence suggests the matter is still up in the air—if not headed for rejection.

“It’s a tough call,” reported a Financial Times of London article last week. A Reuters reporter spoke to 11 TMX shareholders and found 1 favoured the LSE proposal, 5 were undecided, and 5 were in favour of the rival Maple bid and its higher price.

It’s not surprising, then, there was news late last week that the LSE is looking at sweetening its bid. So, I’m planning to wait a few more days before selling into the market at hopefully a higher price.

I don’t want to become a shareholder in whatever entity emerges. I’m in agreement with Cormark Securities analyst Jeff Fenwick that there are just too many uncertainties—regulatory approvals, execution risks etc. I don’t have the time, even the skill set, to shift through all the complexities. 

Shareholder advisory Glass Lewis did recommend in favour of the LSE-TMX merger. But then Maple Group released a rebuttal that makes the its report look like a homework assignment submitted by a Grade 9 student, as can be seen at And I suspect Maple will have a trenchant rebuttal to the Institutional Shareholder Services report just released.

Neither proposal represents an attractive alternative for Canadians, in my opinion. The LSE-TMX merger results in foreign control while a Maple bid gives more power to the already too-powerful banks in Canada.

If a choice has to be made, I think it would be better to go with Maple—but regulators and policymakers should specify some variant of the “regulated monopoly” solution used in the utility industry. It’s good to have a powerful financial sector in Canada to deal with foreign competition but Canadians need protection from excessive use of market power.