LSE humbled as it is forced to abandon TMX merger

Canadian borse fails to win over investors for deal with London Stock Exchange

The London Stock Exchange (LSE) suffered a humiliating blow last night as it was forced to pull the plug on its merger with Canada's TMX after failing to secure shareholder backing for the deal.

The shock collapse of the merger five months after it had initially been agreed left the UK market's chief executive Xavier Rolet red-faced yesterday, and raised inevitable questions over whether the exchange itself would become a takeover target.

The LSE announced it had agreed to terminate the merger after proxy voting on the deal made it clear it was "highly unlikely to achieve the required two-thirds majority approval" from TMX's shareholders. This came despite overwhelming support from the LSE's own investors.

Mr Rolet said he was "clearly disappointed" that despite support for the deal, the companies could not secure the support needed. "We believe the merger would have been a unique opportunity for TMX Group shareholders to be partners in a truly international group," he added.

Tom Kloet, the head of the Canadian exchange, said the board believed a merger "would accelerate our business strategy", before adding it would have "enhanced the performance of Canada's capital markets". The merger fell apart after a consortium of Canadian financial institutions, dubbed Maple Group, tabled a counter bid. Despite the LSE and TMX offering a £400m sweetener to shareholders in the form of a special dividend this month, it was not enough to seal the deal.

Maple Group owns 7 per cent of TMX in its own right, and one market source said securing control "was always going to be a tight call". Maple Group can now proceed with its takeover, although the deal could be hamstrung by competition issues.

Simon Maughan, an analyst at the brokerage firm MF Global, said that the LSE was now a target: "Investors have bought into LSE stock recently in the belief that the TMX bid will fail and the LSE will end up on the block." He added: "I suspect there are more LSE shareholders willing to sell now."

The LSE has been no stranger to takeover approaches since it warded off a bid from the German exchange group Deutsche Börse in 2004, followed by infrastructure investor Macquarie.

The group also defended itself against two approaches from US exchange Nasdaq OMX in 2006 and 2007. Mr Maughan said: "Nasdaq is the prime candidate. There is bad blood between the exchanges, and the Nasdaq management are aggressive. I don't think you have to look far beyond Nasdaq as a bidder for the LSE."

TMX will have to hand over a C$10m break fee after the deal fell apart, which will rise by a further C$29m if the exchange is bought by Maple, but it will be little solace to the LSE, which will have spent more on fees trying to put the deal together. The company would not comment on how much the failed deal had cost.

Yesterday's events will also throw the spotlight on Canada's attitude to foreign bidders. The LSE's failure comes seven months after the Canadian government stepped in to block BHP Billiton's $38.6bn takeover of PotashCorp. One market source said: "It smacks of protectionism, and means that Canada does not look great as a place for international investment."

PROMOTED VIDEO
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Training/Learning and Development Coordinator -London

£28000 - £32000 per annum: Ashdown Group: Training/Learning and Development Co...

Training Programme Manager (Learning and Development)-London

£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...

.NET Software Developer (.NET, C#, ASP.NET, front-end)

£30000 - £45000 per annum: Harrington Starr: A Global Financial Service Organi...

C# Web developer (C#,MVC,ASP.NET,SQL)

£30000 - £40000 per annum + Bonus+Benefits+Package: Harrington Starr: C# Web d...

Day In a Page

A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on
It's the best of British art... but not all is on display

It's the best of British art... but not all is on display

Voted for by the British public, the artworks on Art Everywhere posters may be the only place where they can be seen
Critic claims 'I was the inspiration for Blanche DuBois'

Critic claims 'I was the inspiration for Blanche DuBois'

Blanche Marvin reveals how Tennessee Williams used her name and an off-the-cuff remark to create an iconic character
Sometimes it's hard to be a literary novelist

Sometimes it's hard to be a literary novelist

Websites offering your ebooks for nothing is only the latest disrespect the modern writer is subjected to, says DJ Taylor
Edinburgh Fringe 2014: The comedy highlights, from Bridget Christie to Jack Dee

Edinburgh Fringe 2014

The comedy highlights, from Bridget Christie to Jack Dee
Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

The woman stepping down as chair of the Heritage Lottery Fund is worried