The head of the Toronto Stock Exchange, facing heat from an Ontario
government that is skeptical about his proposed merger with the London
Stock Exchange, emerged publicly to defend the deal, arguing that it
poses no threat to jobs in the Canadian financial sector and will make
domestic companies more competitive.
In an interview with The Globe and Mail’s editorial board, Tom Kloet
said he believes the $7-billion deal, announced last week, bears few
similarities to the proposed takeover of Potash Corp. of Saskatchewan
Inc. last year by BHP Billiton Ltd., which was ultimately denied by
Ottawa on the grounds that it was not a benefit to Canada.
“I actually think you probably couldn’t have two examples that were much
more different between this and Potash,” said Mr. Kloet, the president
and chief executive officer of TMX Group Inc.,the Toronto exchange’s parent company. “It’s very different from taking
something out of the ground and distributing it.” He pointed out that
Canada will have seven board members, more than any other country.
Mr. Kloet is selling his merger against a backdrop of global
consolidation. NYSE Euronext and Deutsche Boerse officially announced
their proposed merger Tuesday, and Singapore Stock Exchange has made
concessions to get Australian authorities on its side for its proposed
takeover of the Australian Stock Exchange.
Drawing a distinction between TMX and Potash is an attempt by Mr. Kloet
to save his deal from becoming as politically charged as BHP’s bid was.
For that very reason, Mr. Kloet stresses the deal with the LSE will only
enhance Canada’s capital markets, rather that put it at the whim of a
global powerhouse, which is how some people viewed BHP in relation to
Potash Corp.
The merger, he says, will not only raise awareness of Canadian markets
around the world, but will also allow Canadian companies to prosper.
“If we help our companies raise capital in a more efficient manner, it’s
got to be good for Canada, it’s got to be good for the development of
our economy,” he said. This efficiency he speaks of stems from better
access to more investors through listings on both sides of the Atlantic,
as well as shared technological infrastructure.
“Whether this is good for Canada’s capital markets or not, that should be the political driver and the business driver.”
But Mr. Kloet is prepared for a strategic asset debate, should one
arise. He believes the deal transcends protection because it has been
structured so fairly. “Strategic asset or not, you have to let
institutions that are involved in a competitive market engage in
commercial transactions provided they respect the regulatory structure
that’s been set up,” he said.
In terms of regulation, all existing TMX and LSE exchanges would
continue to be regulated by the same bodies, like the Ontario Securities
Commission and the AMF in Quebec. Moreover, the deal has been
structured so that three board seats are guaranteed to be filled by
Canadians regardless of what transpires in the future.
TMX is also emphasizing what will happen if it isn’t allowed to merge.
“Do we run the risk as this consolidation game continues to becoming
somewhat marginalized? Yeah, I think there is a risk,” he said.
Still, Mr. Kloet didn’t shy away from the political aspect of his deal.
“We respect that there’s a political element to it,” he said. “We look
forward to having the chance to present in a comprehensive way the net
benefits to Canada.”
If the Singapore-Australia example is any indication, the political game
could get quite heated. In fact, Singapore and ASX changed their deal’s
terms significantly Tuesday in an attempt to make it more politically
palatable. Under the new terms, Australia gets more directors so that
the board has an equal split with directors from Singapore.
Ontario Premier Dalton McGuinty said Tuesday that his province has the
most at stake in the proposed transaction, because Canada’s financial
hub in Toronto is home to the country’s premier stock exchange and tens
of thousands of jobs.
“The federal government is doing what it must do in keeping with its
responsibilities under a particular piece of legislation,” Mr. McGuinty
said. “We’ve got a different kind of an interest, which is how does it
affect our economy. How does it affect our jobs. How does it affect our
stature as the preserve of the best-regarded banking industry in the
world.”
Ontario’s Opposition Leader, Tim Hudak, echoed many of the same
concerns, saying that the exchange could be considered a strategic asset
“in many ways.”
Mr. Kloet tried to address the jobs question Tuesday. “I see no threat
to jobs by this transaction,” he said, adding that more work could come
of it because Montreal’s SOLA derivatives platform will get more use
overseas, which could require more systems architects and developers.
However, Mr. Kloet was relatively mum on the topic of Ontario’s Finance
Minister Dwight Duncan’s heated comments. “We look forward to working
with him to describe the transaction [and] why it’s a net benefit, and
respect his position of authority and the decisions he has to make.”
As for the federal government, “whether we are a strategic asset or not
is up to others to decide,” Mr. Kloet said. “What I will say is we are
an enterprise that operates in a very competitive environment, and we
have to be able to put together commercial arrangements that adhere to
both the spirit and the letter of the law, but [also] allow us to
compete both domestically and globally.”
" USD- PPI & Housing starts figures increases for the month of January .."..
" CAD- Manufacturing sales data had a slight increase for the month of December ".....
Wholesale costs in the U.S.
increased for a seventh consecutive month in January, led by
higher prices for fuel.
The producer price index rose 0.8 percent, Labor Department
figures showed today in Washington. The so-called core
measure, which excludes volatile food and energy costs, rose 0.5
percent, the biggest rise since October 2008.
Growing economies in Asia and Latin America are boosting
global demand for oil and other imported commodities, raising
input costs for American factories. As the manufacturing
industry rebounds, U.S. companies find it easier to pass along
higher costs to corporate clients than to consumers, a sign the
recovery is still broadening out.
“There is more pricing power at the producer level because
of the strength in the manufacturing recovery,” Jonathan Basilie, chief U.S. economist at Credit Suisse in New York.
“Businesses that have been hoarding cash have more purchasing
power.”
U.S. housing starts rose more than expected in January to their
highest rate in four months but permits for future home construction
dropped sharply after hefty gains the prior month, according to a
government report on Wednesday that showed the housing market still
bouncing along the bottom.The Commerce Department said housing
starts jumped 14.6% to a seasonally adjusted annual rate of 596,000
units, the highest since September. December’s starts were revised down
to a 520,000-unit pace from the previously reported rate of 530,000
units. Economists polled by Reuters had forecast housing starts
edging up to a 554,000-unit rate. Compared to January last year,
residential construction was down 2.6%. Groundbreaking last month was lifted by a 77.7% jump in volatile multi-family homes. Single-family home construction fell 1.0%. The
housing market recovery is being hobbled by an over-supply of homes
that is depressing prices. A high unemployment rate also means the
sector, which was at the heart of the worst recession since the 1930s,
will struggle to recover even as the broader economy gains momentum. An independent survey on Tuesday showed sentiment among home builders hovering near all-time lows in February. New
building permits dropped 10.4% to a 562,000-unit pace last month,
partially reversing December’s 15.3% surge that came ahead of changes in
building codes in three states. Permits were pulled down last month by
a 23.8% plunge in the multi-family segment. Single-family unit permits
fell 4.8%. Analysts had expected overall building permits to fall to a 560,000-unit pace in January. New home completions fell 9.5% to a record low 512,000 units in January.
Canadian manufacturing sales advanced 0.4% in December from November,
much less than the 2.1% expected by the market, while unfilled and new
orders fell according to Statistics Canada data on Wednesday.Higher
prices accounted for the rise as volume dropped by 0.5%. Nonetheless,
the December gain in overall sales helped erase November’s 0.6% fall,
and sales ended the year 6.2% higher than in December 2009. The sales
figures are seasonally adjusted. A 16.6% drop in the volatile
aerospace industry, marking the largest fall since September 2009,
offset gains in energy and metals during the month. Higher prices
boosted the oil and coal products industry by 1.5%, while a combination
of higher prices and production pushed primary metals sales up 3.9%. Chemical
products and food also advanced, while machinery and electronics
declined. Thirteen of 21 industries, representing two-thirds of
manufacturing, saw higher sales. Unfilled orders fell 1.6% in
December, led by the aerospace, electronics and machinery industries.
New orders also declined 1.9%, led by the same industries as well as
fabricated metal products.
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