TORONTO — Ontario’s finance minister is ramping up the rhetoric over a proposed merger of the Toronto and London stock markets, accusing its proponents of using fear to push the multibillion-dollar deal through.
In his strongest remarks yet on the merger — which could be blocked by the province — Ontario treasurer Dwight Duncan lashed out at the merger’s proponents for suggesting that Canada’s reputation for free trade and competition are at stake.
“I don’t think they should be afraid of a debate, and I don’t think they should fearmonger like that,” he fired back.
“What they should be doing is acting and thinking about what’s in the best interest of the country. They have a case to put and I look forward to hearing it.”
The deal, which is subject to a federal review, isn’t a merger, he argued.
“I think they should quit calling a merger. It’s not,” Duncan said.
“I think they should talk about the next step. If these two merge, is it their plan to do a further merger? I think that’s an important question. Many people have suggested to me that that is the case.”
Duncan warned that a global wave of stock market mergers could have dire consequences for smaller Canadian companies which want access to capital markets.
“There will be fewer stock markets left in the world — that is clearly the trend that is going on,” he said. “You’ll have essentially an oligopoly, which means pricing of listings, in my view, will be going up. If those listing prices go up, what does that mean for small and mid-sized Canadian businesses trying to access world capital markets?”
Supporters of the deal ought to answer those questions and allow a “rational” debate before an all-party committee that will examine its potential impact on Ontario’s economy, he added.
“And by the way, this is about making sure markets continue to be accessible and free,” Duncan said.
“When you create oligopolies in stock markets, which what appears to be happening in the world, do you really have a better and freer trade opportunity? I don’t think so.”
Duncan also bristled at suggestions that he’s out of touch with Bay Street, whipping out a photo of himself at the TSX after an industry veteran suggested the minister didn’t even know where it was.
The all-party committee has until April 7 to complete its work. It’s findings will be part of the Ontario’s submissions to the federal government, which will have up to 75 days to review the deal.
The Ontario Securities Commission is planning to hold public hearings on the proposed merger. The Quebec government has asked its securities regulator to hold hearings as well.
The transaction would merge the London exchange with TMX Group (TSX:X) into a $6-billion entity and form the world’s eighth-biggest securities market.
However, it would technically give shareholders of the LSE somewhat more than half of the combined company’s stock and board.
Ontario has the power to block the deal, but Duncan hasn’t said whether the Liberal government is prepared to use it.
Industry Minister Tony Clement has promised to consult with the affected provinces, which include Quebec, Alberta and British Columbia.
Experts say Ottawa will likely give a lot of weight to what the provinces say, as it did last fall when the federal Tories rejected a takeover bid for PotashCorp. (TSX:POT) after the Saskatchewan government objected.
Under the planned merger, Toronto would be headquarters for equity listings for the entire group and would be the joint head office for the entire group along with London.
Montreal would be the hub for derivatives trading, Calgary for the energy group and Calgary and Vancouver would jointly share headquarters of the junior TSX Venture Exchange, a successor to the Alberta and Vancouver stock exchanges.
London will be joint head office of the overall company and be the base for the company’s chief executive officer. It will also be a centre for international listings and for the group’s technology solutions business and the centre for information services and post-trade services.