The London Stock Exchange (LSE) has agreed an all share "merger of equals" with Canada's TMX Group, creating a global superpower that will have a strong technology emphasis.
The proposed deal, unanimously recommended by both boards, will see LSE shareholders own around 55% of the group, with TMX holding 45%. The combined entity - worth around £5 billion - will be dual listed and jointly headquartered in London and Toronto.
LSE chief Xavier Rolet will become CEO of the merged operator with TMX CEO Thomas Kloet taking on the role of president. TMX CFO Michael Ptasznik will continue in that role and Raffaele Jerusalmi, CEO of Borsa Italiana will be a director.
Rolet has placed a heavy emphasis on technology since taking over at the LSE, acquiring vendor MillenniumIT to both improve the bourse's own trading platform and add a new revenue stream.
In a conference call today, he predicted that over 30% of the combined revenues will come from technology and information services, claiming there is a "massive opportunity" for the group to take on Nyse Euronext and Nasdaq OMX as a provider of IT systems to bourses in emerging markets.
With access across the company to MillenniumIT and TMX's Sola derivatives trading platform, the "merged Group will offer the marketplace best-in-class capabilities and applications as well as a strong and efficient platform through which to market technology to the global exchange and financial services industries," says a statement.
The LSE is preparing to move its own main market onto the MillenniumIT system this month but the on the conference call, the leadership said that it is "premature" to discuss moving to a common technology platform for the entire group.
The group will have over 6700 listed companies and be the number one global listings venue for natural resources, mining, energy and clean technology. The exchanges also claim the merger will create "substantial" value for shareholders, with £35 million revenue benefits in year three, growing to £100 million in in year five.
Says Rolet: "This new international leader, marrying the right cost structure, financial strength, technological expertise and product portfolio, will be strongly positioned to capitalise on growth opportunities in emerging markets and deliver them to our customers in North America, Europe and beyond. Together, we will also be uniquely positioned to offer high-performance, low-cost technology solutions to our exchange clients around the world. We are aiming at nothing less than becoming a true powerhouse in the global exchange business."
Kloet adds that "with access across the company to the cutting-edge SOLA derivatives trading platform and MillenniumIT assets, the Merged Group will offer the marketplace best-in-class capabilities and applications as well as a strong and efficient platform through which to market technology to the global exchange and financial services industries."
The merger is expected to be completed in the second half of this year, subject to shareholder, court and regulatory approval.