Canada's TSX Group is to merge with the Montreal Stock Exchange in a $1.3 billion agreement that will create a single multi-asset class execution venue for the Canadian cash and derivatives markets.
The merged entity, to be known as TMX Group, will have its head office in Toronto, but will continue to trade in derivatives out of Montreal.
In the cash and stock deal, MX shareholders will receive 0.5 of a common share of TSX Group and $13.95 in cash. That puts a C$5.36 premium on the MX closing price of $37.2 on Friday.
Richard Nesbitt, chief executive officer of TSX Group comments: "This combination grows out of a common vision for the future of the Canadian capital markets. Customers in Canada and internationally will benefit from increased liquidity levels, accelerated product development, a fully diversified product suite, and superior technology."
Rumours of a merger between the two have been sweeping Canada for months, with new competition on the horizon and the expiration of a 10-year non-compete deal in 2009 looming. But negotiations over leadership and geographical issues have been delicate.
Under the agreement, the TSX's Nesbitt will be CEO of the integrated TMX and his opposite number in Montreal Luc Bertrand will be deputy CEO, with responsibility for information technology across the merged group.
The group expects strong prospects for growth in new markets, such as carbon trading through the Montreal Climate Exchange, and outside of Canada, particularly in the US via MX's interest in Boston Options Exchange (BOX).