London Stock Exchange Fails in Take-over, Becomes Target

July 2nd, 2011
in econ_news

London-stock-exchange Econintersect:  In the middle of the past week shareholders of the TMX (Toronto Stock Exchange) failed to approve a planned merger with the LSE (London Stock Exchange).  The early proxies for the approval by TMX shareholders made it evident that a required 2/3 vote for approval of the merger would not be possible.  The failure of the merger came as a hostile bid for the TMX by the Maple Group became publicly known.  The Maple Group is a consortium of business and banking interests which are all Canadian.

Follow up:

Immediately after the LSE/TMX deal fell through, rumors started that the LSE itself would become a takeover target.  The NASDAQ OMX, which failed in a hostile bid for the NYSE Euronext earlier this year, has been most prominently mentioned as a potential merger partner. , is widely perceived as a potential merger partner for the LSE.  However, Wall Street & Technology reports that things may move more slowly going forward and become a negotiated merger than a takeover bid:

(Robert)Greifeld (Nasdaq CEO) and LSE counterpart Xavier Rolet are seen as wounded by their dashed deals. Some analysts said neither can afford another failure, and that any tie-up between the two would likely have to be friendly.

Wall Street & Technology also reports:

Sandler O'Neill analyst Richard Repetto, in a note to clients, said a Nasdaq-LSE "merger-of-equals" could add nearly 20 percent to the earnings of the combined companies, assuming they are able to cut costs as sharply as exchanges have proven in recent years.

Yet with three of four big cross-border deals already killed this year -- including Nasdaq's bid for NYSE Euronext -- executives may well tread cautiously in a world where nationalism, politics and antitrust concerns frustrate plans to revamp ownership of the world's capital markets.

The LSE-TMX failure "points to more deals with less people willing to do them," said Georges Ugeux, a former New York Stock Exchange executive vice president who now runs boutique investment bank Galileo Global Advisors.

The three big cross-border deal failures referred to in the WS&T article are the NASDAQ OMX bid for NYSE Euronext and the LSE/TMX merger, both mentioned above and the SGX (Singapore Stock Exchange) bid for the ASX (Australian Stock Exchange), which was blocked by the Aussie government.  These and other stock exchange merger efforts and rumors have been reported by GEI News throughout the year 2011 to date.

Sources:  Reuters, Wall Street & Technology and GEI News

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