LSE merger campaign advert easy pickings

TSX / LSE Merger Part 22

Did you happen to read the full page ad laying out the selling points for the TSX / LSE merger arrangement? I know you saw it, but did you read it? It warranted some translation for the layperson who might be confused about the features of the LSE bid, not to mention the recently watered-down promises of the merger’s expected benefits for Canadian companies:

“Accretive to adjusted earnings per share”

– whenever a company talks about the transaction being “accretive to adjusted earnings per share”, you must appreciate that’s simply because they don’t like the answer they get when they use basic published “accounting earnings”. As in, the actual figures. Adjustments are often made to remove all sorts of unpleasant or supposed one-time elements in a company’s GAAP earnings. I checked the Feb 9, 2011 Merger Agreement between the LSE and TMX Group for a definition of what exactly “Adjusted Earnings” means in this deal instance, but came up empty.

“Delivers accelerated growth prospects through revenue synergies”

– With barely a handful of large Canadian-based publicly-traded companies choosing to cross-list on the London Stock Exchange prior to the proposed transaction, it seems odd to suggest that “revenue synergies” are around the corner. Mind you, LSE hasn’t promised that. They’ve merely argued that “accelerated growth prospects” are in the cards. “Prospects” being the key. That’s like saying the Toronto Raptors’ draft prospects are going to help us win more games. Since we’ve already shown how hopeless the LSE was for Canadian-based growth stories (see prior representative post “YM Bioscience another case of TSX/LSE false hope Mar 4-11), you can chuck this argument.

“Rapid and efficient introduction of new products and services”

– Wasn’t the existing TSX management team doing that already?

“Greater visibility and access to global investors”

– I did my best to present some facts to counter this Fool’s Gold promise during the Queen’s Park hearings into the proposed merger (see prior post “Presentation to the Ontario Select Committee on TSX/LSE merger Mar 2-11).

“Efficient capital raising to fuel growth and innovation”

– Since the advert would been seen to be a solicitation of investor shares, I love how the LSE’s lawyers wouldn’t let their PR people claim in print that the proposed merger will deliver “more efficient capital raising”, since many of us have shown that the merger’s proponents were talking nonsense on this point during the first few weeks of their pitch. I credit TSX CEO Tom Kloet for no longer arguing “that Canadian companies’ capital-raising efforts would become more efficient”. Four months later, the key merger promise is just “efficient” capital raising, not “more efficient”.

Wasn’t that they key promise of the LSE merger: that a Canadian junior miner or tech firm would have better access to European investors as a result of the proposed LSE takeover? It was never credible, even if certain editorial boards fell for the pitch. But, now that the chips are down and there are no facts to support the specific claim, it doesn’t make the legal cut when formal solicitation begins. Fascinating.

MRM