TORONTO — The CEO of the TMX Group is making a renewed pitch about Canada’s role in a merger with the London Stock Exchange, as the company starts putting the finishing touches on its paperwork to seek Canadian regulatory approval.
Tom Kloet said Canadians will retain a large amount of control if the merger between the Toronto and London stock exchanges goes ahead.
At a speech to the Toronto Board of Trade Monday, Kloet said the new company will merge at a holding company level, but the two exchanges themselves will stay separate.
“What we are proposing is a pooling of ownership at the holding company level — not a merger of the exchanges themselves. It is a critical distinction,” he said.
“Unlike many other combinations, Canadian board membership is entrenched at the holding company level for the long-term.
“Regardless of future developments, Canadians will have prominent seats on the board for years to come.”
The company is preparing to submit its formal merger proposals to Canadian regulators in the coming weeks, though Kloet would not provide a definitive timeline as to when the paperwork would be complete.
Kloet said he has been speaking with various groups, from politicians to miners to bankers to persuade them a merger would benefit, not harm, Canadian interests, a key test under the Investment Canada Act.
Several of Canada’s big banks have raised concerns about the deal.
The proposed merger — which is technically a takeover of the TMX Group by the LSE group — has met with opposition from those who worry it could undermine Canadian oversight and leave Canada’s biggest stock exchange dominated by foreign interests.
Kloet, who is a U.S. citizen, told the audience that Canadians will play significant leadership roles in the proposed new company, with seven out of 15 directors nominated by the TMX.
He said as CEO of TMX Group (TSX:X) and president of the proposed merged company he would personally be able to ensure Canadian interests are at the heart of the new company’s corporate culture.
Kloet would direct the strategy and management of all the merged company’s business units and exchanges from Toronto.
He said that means a Canadian resident will lead the combined group’s global listings business, Toronto will attract, retain and nurture listings for companies of all sizes for the entire group, which would also operate exchanges in London and Italy.
Kloet said Canada would not relinquish regulatory control to London.
The London exchange bought Italy’s Borsa Italiana in 2007, and the TMX-London merger would follow a similar model — where British regulators do not get involved in the Italian stock market, and Milan stays out of the London exchange, Kloet said.
Stock exchanges around the world have been seen a flurry of mergers and consolidations in the last few months as companies seek to grow in order to compete against each other globally.
Last week, Nasdaq offered to buy the New York Stock Exchange for $11.3 billion, outbidding a competing offer from Germany’s Deutsche Borse.
Kloet said a merger with the London exchange is necessary in order for the Toronto Stock Exchange to attract the best companies to list their shares.
“I would call it a hyper competitive world and its very important that we continue to evolve our organization in a way that makes sure we’re competitive globally,” he said.