The London Stock Exchange Group and TMX Group of Toronto said Wednesday they would combine operations in “an all-share merger of equals.’’
The move comes five years after the Nasdaq OMX Group tried but abandoned an attempt to create a cross-atlantic exchange operation by acquiring the LSE Group. And it comes four years after the New York Stock Exchange and the pan-European Euronext exchange merged.
By domestic market capitalization, the combination of the LSE and TMX groups will jump past Nasdaq OMX in size, according to figures kept by the World Federation of Exchanges. The combination will still trail NYSE Euronext.
The new cross-atlantic group will have headquarters in London and Toronto, the merger partners said.
They will create a global listings hub and “international markets for businesses of all sizes.” The TMX Group, for instance, runs a venture exchange, that helps fund startups. It also runs the Toronto and Montreal exchanges, from which it draws its name.
The combined group also expects to be the primary listing venue for natural resources, mining, energy and clean technology companies
Altogether 20 trading markets across North America and Europe will be operated by the combination.
The merger will create $56 million in revenue benefits and $56 million in savings, as well, the two firms estimated.
"We are today announcing the creation of a global leader in the exchange space,’’ said Chris Gibson-Smith, chairman of London Stock Exchange Group. “We will be able to offer shareholders and customers a business significantly greater than the sum of our parts. “
The combination will have a “positive impact” on Canadian, British and Italian markets, said Wayne Fox, chairman of TMX Group. The LSE Group owns the Borsa Italiana.
The board of the merged group will have 15 directors, seven to be nominated by TMX group and eight to be nominated by LSEG. Of the LSE’s eight, three are expected to come from the Borsa Italiana.
Executive management and senior leadership “will be drawn from a balance of leaders from both organizations,’’ the companies said.
TMX shareholders will receive 2.9963 LSEG ordinary shares for each TMX share.
LSEG shareholders will own 55 percent and TMX shareholders will own 45 percent of the new company.
LSE Group has revenue of $1.0 billion in 2010; TMX Group $626 million.
Completion of the merger is subject to regulatory and other approvals, including from LSEG and TMX shareholders as well as court approval in Ontario.