London Stock Exchange seeks to merge with Toronto's TMX

The London Stock Exchange Group plc (LSE) said that it is in advanced negotiations with the operator of the Toronto Stock Exchange, the TMX Group, regarding a potential merger.

The LSE confirms that it is in advanced talks with TMX Group regarding a possible merger of equals to create an international exchange leader, the exchange said.

The merged exchanged will be managed by a group drawn from a balance of leaders from both organizations, LSE added.

According to Bloomberg, LSE would control 56 percent on the new exchange.

The merged entity (which according to media reports will have a total value of about £5.5-billion, making it the world’s eighth-largest exchange).

Some of the biggest mining and gold companies trade on the LSE, while TMX features hundreds of small mining firms.

Since the market bottom of March 2009, shares on LSE have surged 141 percent, while TMX has gained 35 percent.

“It seems so logical to me because you’re creating the largest resources exchange in the world,” Thomas Caldwell, chief executive officer of Toronto-based Caldwell Securities Ltd., told Bloomberg. “We actually recommended it to both companies months ago.”

With the ongoing commodity boom, the proposed merger makes sense.

Should such a combination come to pass, it would follow a line of merged exchanges that have taken place in recent years.

The LSE, which has itself been the target of various takeover bids, acquired Borsa Italiana of Italy in 2007.

The New York Stock Exchange acquired Euronext in May 2006, while Germany’s Deutsche Borse (which itself failed to acquire Euronext) took over the International Securities Exchange in the U.S. in 2007.

The LSE already operates the European bond market, MTS Group, as well as the Turquoise trading platform. TMX also operates the Montreal Exchange and the Boston Options Exchange.