A government-commissioned report on a proposed deal between the companies that operate the Toronto and London stock exchanges will reflect concerns raised during committee hearings by calling for major changes to protect Canada’s interests, sources say.
An all-party committee of the Ontario legislature will release its report on Tuesday. It will recommend changes to address the worry that the transaction is not in Canada’s best interests because majority control of the combined entity would reside outside this country, Queen’s Park sources close to the situation said.
At issue is that fact that shareholders of TMX Group Inc., owner of the Toronto Stock Exchange, would end up with seven of the 15 seats on the combined entity’s board of directors. As a result, the board in theory could make decisions not in Canada’s best interests. “The recommendations are intended to strengthen Canada’s position,” one of the sources said.
Committee members raised red flags about the board composition during the first day of public hearings last month.
“Critics would say control rests with the others and the Toronto exchange could become that of a branch office,” Progressive Conservative MPP Peter Shurman told the hearing.
The committee does not have the power to approve or reject the multibillion-dollar transaction. But its recommendations are widely expected to add a powerful voice in a proposed transaction that has sparked intense debate in the business community.
Ontario Finance Minister Dwight Duncan set up the committee to examine the impact of the proposed transaction on Toronto’s financial services sector, which employs 300,000, as well as the mining industry in northern Ontario.
Mr. Duncan has expressed reservations about the merger, questioning whether it makes sense for Canada’s premier stock exchange to join forces with an overseas partner. He declined to comment Thursday on the committee’s recommendations.
“We take the advice of the legislative committee very seriously,” Mr. Duncan told reporters. “I look forward to seeing what the actual recommendations are.”
The committee is not unanimous in throwing its conditional support behind the transaction. Gilles Bisson, the New Democrat member on the nine-person committee, opposes the deal and has written his own report, disagreeing with his Liberal and Conservative colleagues.
“They’re tacitly supporting it,” Mr. Bisson said in an interview on Thursday. “We’re not of the same view … and we didn’t think that amending the deal in any way would get to the core issues.”
During the hearing, TMX Group chief executive officer Tom Kloet and his counterpart at the London Stock Exchange Group PLC, Xavier Rolet, fielded questions about whether the domestic company would end up the weaker partner and whether enough was being done to protect Canada’s interests.
Tom Caldwell, chairman of Caldwell Securities Ltd. and a supporter of the deal, said it has been widely expected that the committee would ask for some changes to the offer to satisfy local concerns.
“Safeguards are to be expected,” he said.
With files from Janet McFarland