Canada banks put heft behind opposition to TMX deal

Wed Mar 9, 2011 6:01pm EST
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By Pav Jordan and Claire Sibonney

TORONTO (Reuters) - Some of Canada's big banks are speaking out against London Stock Exchange's proposed C$3.1 billion ($3.2 billion) takeover of TMX Group, raising a formidable new obstacle to the deal's approval.

At an Ontario hearing on Wednesday, bank executives echoed criticism that the deal will hurt Toronto's status as a global financial center, and ultimately harm the prospects of Canadian companies looking to raise capital on public markets.

"While this has been billed as a merger of equals ... it is not," said Bob Dorrance, head of the investment bank unit of Toronto-Dominion Bank, which has led the banks' charge against the deal. "The TMX will now report to the LSE-TMX."

Opposition from the banks, which dominate capital markets activity, will add to the pressure on Ottawa to veto the deal.

The Conservative government last year blocked BHP Billiton's takeover of Potash Corp following ardent opposition in Potash's home province of Saskatchewan.

In Ontario, home base for the TMX's Toronto Stock Exchange, Finance Minister Dwight Duncan has spoken out against the deal, raising pressure on Canada's securities regulator to block it. The transaction faces a multitiered approval process at provincial and federal levels.

The federal government's review will begin as soon as the government receives an application for approval.

Six big lenders dominate the banking sector and federal laws protect the banks from foreign takeovers. That gives them a hefty stake in assuring Toronto grows as a financial hub.   Continued...

<p>London Stock Exchange CEO Xavier Rolet (L) and TMX Group CEO Tom Kloet speak to the media in an overall view of the TMX Broadcast centre regarding the merger of the TSX and the LSE in Toronto, February 9, 2011.REUTERS/Mark Blinch</p>