The merger mania in the exchange space took another twist last week when a consortium of Canada’s largest banks and pension funds put forward an alternative offer for TMX in an attempt to scupper the LSE Group’s own merger proposals with the Canadian exchange.
There’s a clue to the consortium’s basic pitch in its name – the Maple Group – and the rhetoric from its spokesman Luc Bertrand, who cites the fact that Canadian jobs will be saved in his all-Canada solution. This argument resonates well with domestic concerns over the LSE’s “merger of equals” as the LSE would have control over the combined group. History has shown, however, that protectionism only really works if the country concerned has some form of natural monopoly or real financial firepower (e.g. China).
So, will a Canadian-only stock exchange really be able to compete in the global exchange space and can Canadian capital markets really wait it out on the sidelines whilst other exchanges find partners? If the answer to either of these questions is in doubt, then maybe the LSE Group’s bid is actually the better outcome for Canada.
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