LSE hails TMX deal but Canadians remain wary

Shares in the London Stock Exchange soared yesterday after it confirmed plans to merge with TMX Group, which owns the Toronto stock exchange.

The LSE finished up 28p at 920p, despite warnings from Canadian politicians that they would examine the deal to see if the Investment in Canada Act applies. The law was used to scupper the miner BHP Billiton's hostile bid for the fertiliser maker PotashCorp last year.

One of the key selling points of the tie-up is that would provide the LSE with a major derivatives platform, the lack of which is seen as one of the biggest weaknesses in its current portfolio. The LSE chairman, Chris Gibson-Smith, said the proposed merger was about creating "global competitiveness" and added: "This is a good deal for London and a good deal for Canada."

Mr Gibson-Smith accepted that the perception of exchanges as national assets still persisted. He said: "We are quite clear that we have to satisfy Canadian political opinion about the merits of this deal and we are confident we can do that."

While the deal is being billed as a merger of equals, shareholders in the LSE will hold 55 per cent of the combined group. It will also continue to be a London-registered company regulated by the Financial Services Authority, with LSE chief executive Xavier Rolet taking the helm. Canada will provide the chairman.

The LSE will become the biggest exchange for natural resources companies, a major selling point of the deal given the current boom in commodities driven by China and India.