LONDON: The London Stock Exchange launched a merger on
Rivals Deutsche Boerse and NYSE Euronext revealed late Wednesday they were in "advanced discussions" on merging to produce the world's largest stock exchange operator by revenues and profits.
Both developments sparked intense speculation that the Chicago Board Options Exchange (CBOE) could become the next takeover target, sending its share price spiking higher.
The London Stock Exchange Group and TMX Group, which operates the Toronto Stock Exchange, said in a joint statement that they have agreed to merge in a deal that is slated to be completed in the second half of the year.
The enlarged group, which will be jointly headquartered in London and Toronto, will have a combined market capitalisation of almost $7.0 billion dollars (5.1 billion euros).
The new company, spanning 20 trading markets and platforms across Europe and North America, will be well-placed to tap into the commodities sector at a time of surging prices for raw materials like copper and crude oil.
"London Stock Exchange Group Plc and TMX Group Inc. today announced an agreement to combine Europe's and Canada's leading diversified exchange groups in an all-share merger of equals," the pair said in a joint statement.
"The merger will create a world-leading organisation and is unanimously being recommended by the boards of both LSE and TMX."
The LSE's chief executive, Frenchman Xavier Rolet, will take up the same role at the new group, while TMX boss Thomas Kloet will become president.
TMX Group operates the Toronto Stock Exchange, the Montreal Stock Exchange and the Calgary-based TSX Venture Exchange.
"This is an incredibly exciting merger with considerable growth opportunities," Rolet said in the statement.
"We are creating the world's largest listings venue for the commodities, energy and natural resources sectors, as well as the premium market for small, mid-size and growth companies," added Rolet, who became LSE boss in 2009.
The pair forecast annual savings of £35 million by the second year of the merger.
The transaction was billed as a merger of equals but LSE investors will hold the upper hand with 55 percent of the new group, while TMX shareholders will have 45 percent. Both exchanges retain their existing brand names.
In reaction, LSE shares spiked more than nine percent higher but pulled back in late deals as news of the Deutsche Boerse-NYSE Euronext merger talks hit traders' screens.
"The shares did leap initially to 980 pence and remained near there for most of the day but it was interesting that heavy selling in the last hour pushed the shares down to 920 pence," said Spread Co analyst Ian O'Sullivan.
"Whether that was some late profit taking on the move or a change of opinion on the value of the merger late in the day, we will have to wait and see when more details emerge.
"Maybe investors were simply switching to the CBOE and Deutsche Boerse late on, as merger attention turned to them."
The new group, provisionally called LSEG-TMX, will be the world's largest exchange in terms of the number of companies traded, with more than 6,700 listings.
It will also become the number one venue for international listings from emerging and growth markets, according to the statement.
"We are creating an international group with deep expertise, undeniable leadership in key sectors and the ability to compete and win on the global stage," TMX chief executive Kloet said.
"Canadian customers will benefit from access to one of the world's deepest capital pools while European issuers will have an effective gateway to North American financial markets."
Under Rolet's predecessor, Clara Furse, the London Stock Exchange merged with Borsa Italiana in late 2007 and in a bid to remain competitive, the LSE attracted major investment from Dubai and Qatar.
Deutsche Boerse had failed three times to buy the LSE -- firstly in 1998, then in 2000 and also in 2005 -- as it sought to keep ahead of Euronext, which operates the Paris, Amsterdam, Brussels and Lisbon exchanges.