[Canadian] National interest at stake in TMX deal – by Diane Francis (National Post – June 25, 2011)

The National Post is Canada’s second largest national paper. dfrancis@nationalpost.com

No self-respecting nation would allow its stock exchange, the cornerstone of a financial system, to be sold to foreigners. Australia, for instance, rejected a proposed sale of its exchange to Singapore as a “nobrainer.”

And yet, on June 30, the board of directors of the Toronto Stock Exchange will ask its shareholders to bless a sellout to the London Stock Exchange that will, eventually, result in both being sold to even bigger foreign entities. The vote is being staged before regulators and governments have given special permission required to allow the deal to be closed.

There is another competing bid, by Canadian financial players, that won’t need special permission. I don’t want to comment on the merits of that deal, which raises antitrust and other issues.

But the sellout to the British is not in the national interest. It will orphan Canadian entrepreneurs, ideas and corporations. It will result in higher listing fees, more red tape and domination by foreign brokers who know nothing about Canada or the resource sector. It will bypass Canada’s financial capital. It is based on breaking a promise made two years ago by the Toronto stock exchange board to the Ontario Securities Commission and Quebec’s Autorité des Marchés Financiers, promising a 10% ownership limit.

The proposal is audacious -and damaging. The Canadian exchange will be tethered to an exchange on the downstroke, with prospects about as lacklustre as Britain’s. And both will become takeover targets by Singapore or other consolidators as London continues to flag.

The Brits and their allies have been flinging irrelevant mud all over. One commentator labelled opposition in Canada to this deal, like Potash Corp.’s, as examples of “narrow parochialism.” Other sellouts say nixing the deal will send a signal to the world that Canada is not open to foreign investment. What rubbish.

Up to $12-billion is going to be invested, mostly by foreigners, in Saskatchewan in the next few years. The Potash Corp. deal was another strategic asset, a means for Canada to be a player through the company, which was leased by the people of Saskatchewan, the world’s greatest mineral lease for potash.

As I wrote when the TSX sellout was first proposed, the Toronto exchange is not just another public company, but is the linchpin to the nation’s mining and energy industries and is already positioned globally. Here are the facts:

  • The TSX is the top exchange if investing in mining in Africa.
  • The TSX is the top exchange if investing in Latin America.
  • It is the go-to exchange for mining companies internationally.
  • It consists primarily of Canada’s powerful banks and resource companies and has become the sixth-largest exchange in the world by equity of all kinds raised.
  • It is the No. 1 exchange in North America by the number of issuers or listed companies.
  • It is the second-largest exchange in the world in terms of issuers.
  • It lists 55% of the world’s public mining companies.
  • It lists 35% of the world’s public oil and gas companies.
  • It has captured on average 80% of the world’s mining financings.
  • It has raised 36% of total equity globally.

For the rest of this column, please go to the National Post/Financial Post website: http://www.financialpost.com/opinion/columnists/National+interest+stake+deal/5004165/story.html