The Canadian mining sector was generally positive on Wednesday about the news that the holding company of the Toronto Stock Exchange has agreed to a 'merger of equals' with the London Stock Exchange group.
"I think there are quite a lot of tangible advantages to this, obviously cross listings will be facilitated and more accessible, the access to capital will definitely be extended," Tony Andrews, the executive director of the Prospectors and Developers Association of Canada, said in an interview.
Andrews said he met earlier in the day with senior TMX Group officials to discuss the implications of the deal, and noted that the existing structures of the various exchanges will remain in place.
"My assessment of this is that it will not have any negative effects on our members, but there are going to be a lot of benefits."
Mining Association of Canada chairperson Douglas Horswill commented that while the overall effect may not be huge, the implications of the merger should be positive for Canadian mining companies.
"Anything that deepens the capital markets and makes capital available, and I guess if its more available it's cheaper, will help the mining industry over time," he told Mining Weekly Online.
"And to the extent that the merger exposes Canadian listed companies to a wider world audience of investors, that should have some impact for them from the point of view of investment and opportunities to obtain capital."
The merger, in which the TMX will be acquired by the LSE Group, will create the biggest exchange company in the world by total listings, at more than 6 700 companies with an aggregate market capitalisation of some C$5,8-trillion.
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One of the key features of the new group will be the significant representation of mining companies listed on the exchanges.
The TSX and TSX-V already have more mining listings than any other exchange, and a merger with the LSE will add top global players, including the world's number-one and -three mining groups, BHP Billiton and Rio Tinto.
There are more than 1 400 mining and minerals exploration companies listed on the TSX and TSX Venture Exchange, while the LSE lists some 178 across its main board and the Alternative Investment Market, or Aim, for smaller companies.
The second-biggest mining exchange is the ASX, which has some 610 listings in the sector, followed by the NYSE, NYSE Amex and JSE, all with fewer than 100 listed mining companies.
The biggest producers of both gold and potash, Barrick Gold and Potash Corp of Saskatchewan, are also both listed in Toronto.
The merged entity intends to build on its "number one position" in natural resources, TMX CEO Thomas Kloet told reporters on Wednesday morning.
Kloet will be president of the enlarged company after the merger, and LSE CEO Xavier Rolet will be CEO.
CANADIAN APPROVALS?
Under the terms of the merger agreement, TMX shareholders will receive 2.9963 LSE group ordinary shares for each TMX share, which will result in LSE shareholders owning 55% and TMX shareholders holding 45% of the enlarged share capital of the LSE group, the holding company of the merged group, which will be renamed after closing.
A new name for the group has yet to be decided on, Kloet said at a press conference.
The size of the transaction and strategic nature of the TMX Group has prompted a lot of speculation about whether the deal will require and receive approval by the Canadian government, under the Investment Canada Act.
The legislation, which requires proof that large foreign takeovers will result in 'net benefit' to to the country, drew little attention until last year, when Industry Minister Tony Clement refused to approve miner BHP Billiton's planned $40-billion acquisition of Potash Corp of Saskatchewan.
But both Kloet and Rolet said on Wednesday that the TMX-LSE deal is "a very different proposition" to the Potash Corp situation.
The deal is a merger of equals, and the combined entity will be run by representatives from both companies, with headquarters in both Canada and the UK, they said. The groups will make undertakings to the government to satisfy the net benefit requirements.
Clement told reporters in Ottawa that he had not yet determined whether the transaction would merit a review and require approval under the Investment Canada Act, the Globe and Mail reported.
But Andrews said he does not expect the deal will be scuppered by the federal government.
"I don't foresee them having any sort of motivation to block it," he commented.
"Consolidation is a global trend, and I think it's in the interests of all Canadians that our capital markets remain competitive."
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Also on Wednesday, the operator of the Frankfurt Stock Exchange confirmed that it was in advanced talks to buy the holding company of the New York Stock Exchange.
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