The CEOs of the Toronto and London stock exchanges told Ontario provincial legislators last week the merger of their two companies would benefit the province’s financial industry and bring more jobs to Toronto. But members of the committee established to look into the $7-billion deal expressed concern Toronto would become a minority partner and lose status through the merger.
The Ontario legislature became the first government body to look into the proposed merger of London Stock Exchange Group plc. and TMX Group Inc. The committee does not have any binding powers on the deal, but the discussions at Queen’s Park are likely to have an effect on the Ontario Securities Commission as it considers whether it should allow the deal to go through.
Ontario Finance Minister Dwight Duncan, who called the legislative hearings, told reporters Wednesday the committee would help answer questions that still linger about the deal. Duncan voiced concern about the fact LSE is getting 55 per cent of the joint company and seven of 15 board members.
Duncan’s comments come at a politically sensitive time as his ruling Ontario Liberal party prepares for elections later this year.
However, the opposition Progressive Conservative’s representative on the committee, Peter Shurman, and New Democrat Gilles Bisson also expressed concern over the possibility of the TMX becoming a mere branch of the London exchange if it has a minority of seats in the board.
In trying to alleviate the legislators’ fears, the chief executives, Tom Kloet of TMX and Xavier Rolet of LSE, told the committee the merger would increase the profile of Toronto as a global financial centre and would bring more jobs to Canada’s largest city.
Kloet also said Ontario and Canada would still continue to regulate the company’s assets in the province.
“The merger strengthens our company’s future competitiveness and contributes to the growth and competitiveness of the financial sector in which we operate. It does so without in any way diminishing local regulatory authority,” said Kloet.
Rolet added the joining would create a group that will grow both locally and globally.
“We have a clear responsibility to build a quality marketplace, to contribute to Canada’s economic well-being, Ontario’s reputation, and Toronto’s success as a world financial centre,” said Rolet.
The deal, announced with much fanfare last month, faces a series of regulator reviews at the federal and provincial levels.
The federal government has confirmed it will filter the deal through the Investment Canada Act, which means the two companies need to prove the deal is of “net benefit” to Canada.
The federal review could take another month, but in Quebec might take even longer. Its securities regulator, which has a say due to the merger of the Toronto and Montreal stock exchanges in 2008, says it will take up to three months.
Ontario’s role will probably be key in the decision-making process, as the majority of the TMX infrastructure and workforce is based in the province.
