TMX, LSE defend tie-up to wary Ontario lawmakers

Wed Mar 2, 2011 6:14pm EST
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By Solarina Ho and Pav Jordan

TORONTO (Reuters) - The architects of the London Stock Exchange's proposed takeover of TMX Group defended the transatlantic tie-up to skeptical lawmakers on Wednesday as they faced the first of a series of government and regulatory hurdles.

An Ontario legislative review of the deal that began on Wednesday is not in itself legally binding. But it will likely influence regulatory and federal government reviews that have the power to derail the LSE's C$3.1 billion ($3.2 billion) friendly takeover of TMX, operator of the Toronto Stock Exchange.

In questions to the chief executives of the two exchanges, Ontario legislators challenged the notion that the deal is necessary if TMX is going to stay competitive with other consolidating global exchanges. They echoed widespread concern that Canada would cede authority over its own financial markets if it let the deal go through.

The proposed combination has raised fears that the Toronto Stock Exchange could become a "second fiddle in its own backyard," lawmaker Gilles Bisson said as the hearings got underway in Toronto.

Economic sovereignty is a touchy issue in Canada, and these hearings come just four months after the federal government blocked BHP Billiton's $39 billion bid for Potash Corp, saying the Anglo-Australian miner's stewardship of the world's largest fertilizer maker would not benefit Canada.

But TMX CEO Tom Kloet said control and regulatory supervision of the exchange will stay in Canadian hands even after the bourse's owner is folded into the larger London-based company.

"In short...Toronto Stock Exchange will operate for all intents and purposes as before," Kloet told the all-party committee.

Speaking alongside LSE head Xavier Rolet, Kloet said the combination would give Canadian companies increased access to capital and would create a global leader in listings, particularly in natural resources.   Continued...

<p>London Stock Exchange (LSE) CEO Xavier Rolet (R) and TMX Group CEO Thomas Kloet speak to an all-party committee of the Ontario provincial legislature in Toronto, March 2, 2011. Ontario lawmakers began their review of the London Stock Exchange's proposed takeover of TMX Group on Wednesday, the first in a series of steps in Canada to decide the fate of the transatlantic deal. REUTERS/Mark Blinch</p>