TORONTO The London and Toronto stock exchanges started the clock ticking on Friday for the months-long Canadian government review of a $3 billion tie-up that has already polarized public opinion.
Nearly three months after announcing the deal, to opposition from some banks, politicians and companies, the London Stock Exchange (LSE.L) and TMX Group (X.TO) said they filed an application for review under the Investment Canada Act and had talked with provincial securities regulators.
"Filing with the regulators is a good sign," said Renee Colyer, chief executive of global markets research consulting firm Forefactor.
"They're hoping for the best, they believe in what they're doing, they believe it's good for Canada, it's good for London."
The London Stock Exchange bid on February 9 for the TMX Group, Canada's largest stock exchange operator and one of the largest concentrations of mining equity in the world, but had not yet filed for approval for regulators.
Proponents say the deal will help Canadian capital markets, while detractors say it will hand control to London.
A panel of legislators in Ontario -- home to many TMX Group assets -- issued a nonbinding report on April 19 that included tough recommendations for the takeover to be approved.
"This report, as well as other feedback received during the regulatory review process, will receive full consideration during the course of the approval process with the various authorities," the TMX and LSE said in a joint statement.
Under the Investment Canada Act, a foreign investor must prove its deal would be a net benefit to Canada.
Canada's Industry Minister will have 45 days to decide, and can extend that review period by an additional 30 days or longer. The government can ask for undertakings regarding the transaction at any point during the review.
The deal would create a transatlantic exchange and powerhouse in mining and resource equity. It also requires the approval of the Ontario Securities Commission -- which has veto power -- and several other provincial regulators.
TMX Group owns the Toronto Stock Exchange, the TSX Venture Exchange for small-cap companies and the Montreal Exchange, Canada's main derivatives bourse.
A combined entity with the LSE would create a $7 billion exchange doing $4 trillion in annual trading.
The London offer is one of a number of proposed global exchange tie-ups. Two bidders are courting the NYSE Euronext NYX.N, while Australia last month rejected an offer for its main exchange from Singapore.
Canada has rejected two foreign takeover offers since the Investment Canada Act was enacted in 1985.
The Conservatives, leading in opinion polls ahead of Canada's May 2 federal election, have not indicated how they would respond to the deal. But Jack Layton, leader of the second-placed NDP told Reuters on Thursday that he saw too many downsides to approve the bid.
"We worry that Canadian business trying to access capital might have greater difficulty. As much as one might want to pretend that nothing will change, we find that hard to believe," he said in an interview.
"We think the current structure makes the most sense for Canada, so someone would have to do a lot of persuading."
(Reporting by Pav Jordan; editing by Janet Guttsman)