Ottawa will decide within days whether to formally weigh the benefits of merging Canada's key stock exchange with the London Stock Exchange, Industry Minister Tony Clement says.
The big banks that dominate Bay Street have been cautious in their comments on the deal. But pointed objections raised by Ontario on Friday were being reinforced Sunday by one of the country's best known financiers, Brett Wilson, who said he's a "skeptic" on the merger.
Mr. Clement said Sunday he is reviewing the "applicability" of the Canadian Investment Act to the proposed $7-billion-plus merger. He says a decision on whether it can be reviewed will come "in the next few days."
Ontario Finance Minister Dwight Duncan used tough language on Friday, questioning openly whether the transaction would involve a "strategic asset in a strategic industry." Those comments appeared to signal willingness to block the deal.
Mr. Wilson, who is chair of the investment company, Prairie Merchant, and best known to many Canadians as one of the stars of the reality TV show Dragon's Den, said he sees similarities between the proposed stock exchange merger and the push in the 1990s to merge the banks.
"I saw the banks try to merge, the government held back and said 'no' and now we've got two stock exchanges trying to merge and I'm not sure it's a net benefit to Canada," said Mr. Wilson, who built Calgary-based energy investment bank FirstEnergy Capital Corp. into Canada's top energy investment dealer before stepping down in 2007.
Mr. Wilson also raised the issue of who would control the combined entity. The Ontario Finance Minister was vocal on Friday about the prospect of the exchange being influenced by Middle Eastern interests - one of the largest shareholders in the exchange would be the ruler of Dubai.
Mr. Clement says he has not spoken to the Ontario government about the proposed merger. "If the transaction is reviewable I will be, pursuant to my obligations under the ICA, conferring with several provinces, including of course Ontario," he said.
But Mr. Duncan's characterization of Toronto Stock Exchange as a "strategic asset" appears clear enough, echoing the language of Saskatchewan Premier Brad Wall last year when he came out against the attempted takeover of Potash Corp. by an Australian company.
The Premier successfully argued his point. Mr. Clement agreed with the Saskatchewan government and blocked BHP Billiton's $39-billion bid on the grounds that an Industry Canada review found the deal did not provide a "net benefit" to Canada. On the proposed merger of stock market operators, Mr. Clement would apply the same test if his ministry begins a formal review.
So far the Ignatieff Liberals have not taken a position on the deal, while pointing to lack of transparent rules for evaluating mergers and takeovers involving foreign interests.
"On process, as we said during the debate on Potash, Canada must amend the Investment Canada Act to provide more transparency, enforceability and a clearer process for evaluating net benefit," said Markham Liberal MP John McCallum, a former bank economist.
Mr. McCallum observed that the while Harper government has "committed" to clarifying the rules, it "hasn't done anything yet."
Last fall, during the national debate over the proposed Potash takeover, the Liberals pressed the Conservative government for a definition of "net benefit to Canada." So far they have no answer.