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LSE Takeover Equity Evaporates as TMX Deal Belies Profitability: Real M&A

By 24 May, 2011June 6th, 2017News

Bloomberg News

Bloomberg News looks at the true value of the proposed London Stock Exchange and TMX Group deal. The article illustrates that the value of the LSE’s offer to buy the Canadian exchange fell 4.9 percent below the price of the target exchange’s share value on 23rd May 2011. The reality is that this gap is the widest of any all-stock deal over $1 billion, an indication to arbitragers that the LSE’s equity alone won’t be enough to fend off a higher bid from Maple – a consortium of Canadian banks and funds trying to keep TMX in Canadian hands.

The LSE is in a tough position – without the deal, Europe’s oldest independent bourse risks being left out of the industry’s biggest round of consolidation. The article goes on to maintain that a takeover of TMX would create a $7.2 billion exchange, leapfrogging Nasdaq OMX, ASX and Singapore Exchange among the world’s biggest trading venues. However, should LSE lose out on this deal, it would leave the exchange further behind its competitors.

GreySpark reviews the deal, highlighting that two ways of examining this deal is to look at whether or not TMX is currently trading at a premium or if the LSE is trading at a discount. Their view is that while the LSE is big, it is not big enough, which places them in a difficult position.

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