Exchange Consolidation Redux

My last blog suggested that the best outcome for LIFFE would be a tie up with ICE. At which point ICE and Nasdaq OMX withdrew their bid. In the latest demonstration of my powers of prediction I circulated a presentation last week in which I concluded that the LSE bid for TMX in Canada had a 60/40 chance of succeeding. The latest gossip from Toronto suggests that these proportions should perhaps be reversed.

It is now looking increasingly unlikely that the bid will go through. One factor relates to feedback the Canadians have got from Milan. I have been told that when the Toronto authorities consulted the Italians about the success or otherwise of the LSE’s last merger with the Milan Stock Exchange the feedback they got was negative. The Italians apparently felt that the promises made by the LSE to treat the link-up as a merger of equals never materialised in practice. The Italians are clearly not happy with the way the merger has panned out and words such as arrogance have been used to describe the relationship.

This gossip ties in with views coming back from Toronto about “political unhappiness” with the proposed tie up with London. There is a feeling that Toronto is an important financial centre in its own right and that its prime focus is and ought to remain North America. A tie-up with the LSE would downplay the importance of Toronto and shift its focus more towards London at the expense of its more immediate and more important neighbours in the USA.

If, of course, the deal with the LSE does not go through this increases the ability of Nasdaq to bid for the LSE, as the market cap of the two entities are now more or less in line (after the recent rise in the LSE’s share price). Will they do so? Let’s see. I’m giving up predictions.

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