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Mar 31, 2008

M&A roundup: stock exchange consolidation

Consolidation and strategic alliances among stock exchanges

Set to complete
In the latest tie-up between stock markets, TSX Group, the Canadian exchange that controls the Toronto Stock Exchange, is merging with the Montreal Exchange (MX) in a deal estimated to be worth C$1.3 bn ($1.33 bn).

The two exchanges are a good fit for each other. This is because, back in 1999, they struck a deal: TSX Group said it would concentrate on senior equity trading while MX said its focus would fall on the derivatives market. Two other exchanges, Alberta and Vancouver, took junior equities; since then, both have been taken over by TSX.

As a result, there is little overlap between the activities of TSX and those of MX. This means the combined company, TMX Group, will be a good strategic fit, says Steve Kee, head of corporate communications at TSX.

It needs to be. Globally, stock markets are linking up in a bid to undercut their rivals on price and offer trading services on an international level. ‘The timing of the merger between TSX and MX was driven by two truly historic years of consolidation,’ states Kee. ‘Big players are now operating right on our doorstep.’

MX shareholders have realized the need to move with the times. On February 13, 2008, in an important step, they approved the sale of their shares to TSX by a convincing 99.6 percent.

In other exchange news, the Qatar Investment Authority (QIA) sold its stake of just under 10 percent in OMX, the Nordic exchange operator. This has opened the way for the QIA’s Middle Eastern rival, Borse Dubai, to complete its protracted $4.9 bn takeover of OMX.

In a complicated arrangement, Borse Dubai is buying OMX before swapping it for a 19.9 percent stake in NASDAQ plus the American exchange’s 28 percent stake in the London Stock Exchange. In addition, Borse Dubai, NASDAQ and OMX will form a strategic alliance.

The Swedish government also agreed to sell its stake in OMX to Borse Dubai, a holding of 6.6 percent. Through the sale, the Swedish finance ministry hopes to make Stockholm a financial center capable of rivaling Frankfurt.

‘I am very pleased that Borse Dubai and NASDAQ have recognized the potential of Stockholm as a financial hub,’ says Mats Odell, Sweden’s minister for financial markets, adding that Sweden makes a gain of more than SK1 bn ($1.6 mn) from the sale.

Details correct at time of going to press.