(Corrects 12th paragraph to show Tony Clement is industry
minister, not finance minister)
* Report will influence Ontario regulator's decision
* Kloet says no foreign regulation over Toronto exchange
* CEO says Toronto leadership in resources will only grow
* Legislator fears TMX could become "second fiddle"
(Adds details, comments from legislators)
By Solarina Ho and Pav Jordan
TORONTO, March 2 The architects of the London
Stock Exchange's (LSE.L) takeover of TMX Group (X.TO) defended
the transatlantic tie-up to skeptical lawmakers on Wednesday in
the first of a series of government and regulatory approvals.
An Ontario legislative review that began on Wednesday is
not in itself legally binding. But it will likely influence
regulatory and federal government reviews that have the power
to derail the C$3.1 billion takeover.
In questions to the CEOs of the two exchanges, provincial
legislators challenged the notion that the deal is needed to
keep TMX competitive with other consolidating global exchanges,
and they echoed widespread domestic concern that Canada would
cede authority over its own financial markets.
The deal has raised fears that the Toronto Stock Exchange
could become a "second fiddle" in its own backyard," lawmaker
Gilles Bisson said as the hearings got underway in Toronto.
Economic sovereignty is a touchy issue in Canada, and these
hearings come just four months after the federal government
blocked BHP Billiton's (BHP.AX) $39 billion bid for Potash Corp
(POT.TO), saying the Anglo-Australian miner's stewardship of
the world's largest fertilizer maker would not benefit Canada.
But TMX Chief Executive Tom Kloet said control and
regulatory supervision of the exchange will stay in Canadian
hands even after the bourse's owner is folded into the larger
"In short...Toronto Stock Exchange will operate for all
intents and purposes as before," Kloet told the all-party
For timeline on LSE-TMX deal: [ID:nN28155639]
For factbox on approval process: [ID:nN15252795]
For factbox on LSE and TMX history: [ID:nN08113490]
Speaking alongside LSE head Xavier Rolet, Kloet said the
combination would give Canadian companies increased access to
capital and would create a global leader in listings,
particularly in natural resources.
The Toronto Stock Exchange and its junior counterpart, the
TSX Venture Exchange, list thousands of mining and energy
companies, winning Canada a role as a hub of resource capital.
"By joining forces with London, our leadership in mining
and energy will only grow," Kloet told the panel.
Jammed into a packed conference room in Toronto's
Romanesque provincial parliament buildings, the executives were
grilled by more than a dozen legislators. Lawmakers posed
pointed questions, but the overall mood was cordial.
MORE APPROVALS TO COME
Following the provincial hearings, the deal will go before
regulators from at least four Canadian provinces, and must also
be be approved by the Canadian Industry Minister Tony Clement,
who surprised the market when he halted the BHP-Potash
transaction late last year.
The weight of public opinion is crucial as Ontario's
governing Liberal Party trails the Progressive Conservatives in
opinion polls ahead of the October election in the province,
which is home to Canada's financial capital Toronto.
That said, Ontario politicians on all sides have so far
been united in criticizing the proposed deal.
The complex approvals process and risks about whether it
will go ahead has made investors cautious about the friendly
deal. TMX shares on Wednesday were just 3.7 percent below the
implied offer price, after trading about 10 percent below the
offer two weeks ago.
The two exchanges have said the combined company could go
on the offensive as stock market competition intensifies
internationally, especially with Deutsche Boerse (DB1Gn.DE) in
takeover talks with NYSE Euronext NYX.N. [ID:nN28270191].
The two CEOs won support from Frank Smeenk, head of tiny
chrome and base metals explorer KWG Resources KWG.V, who told
the hearing the deal would precipitate an "entirely new era of
(Additional reporting by Claire Sibonney, writing by Cameron
French; editing by Janet Guttsman)