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Announcement:

Moody's reviews for upgrade the Baa2 ratings of LSEG after merger announcement with TMX

09 Feb 2011

London, 09 February 2011 -- Moody's Investors Service has placed the Baa2 ratings of London Stock Exchange Group plc (LSEG) on review for possible upgrade following an agreement today by LSEG to merge with Canada's main exchange group TMX Group Inc. (TMX) in an all share transaction. In the same rating action, the Baa1 ratings of London Stock Exchange plc (the operating exchange subsidiary of LSEG) were also placed on review for possible upgrade. TMX is not rated by Moody's.

Moody's said that the rating action reflects the potential positive benefits from the merger between LSEG and TMX both in terms of stronger financial flexibility and cash flow for the combined group and in the creation of an expanded franchise with better business and geographic diversification. The merger will be implemented by means of a plan of arrangement in Ontario under which TMX shareholders will receive 2.9963 LSEG shares for each TMX share they hold. Following the merger, to be completed sometime in the second half of 2011, LSEG shareholders will own 55% and TMX shareholders 45% of the combined group. LSEG will be the holding company of the merged group.

"LSEG has faced considerable competitive challenges in the past few years as evidenced by its loss of market share in the UK", said Marjan Riggi, the lead analyst for LSEG at Moody's. While the company's financial metrics have improved considerably in the past two years, LSEG's lack of a meaningful presence in clearing and derivatives have been significant obstacles to its future earnings and expansion opportunities. As such, Moody's views positively the potential strategic benefits of the LSEG merger with TMX which is the leading derivatives and clearinghouse platform in Canada. Furthermore, TMX is the main exchange platform for trading of Canadian cash equities and it has a strong global presence in resource listings and data services all of which should enhance LSEG's current listing and post-trade franchises. In addition, TMX brings with it a leading presence in North American physical energy trading and clearing. Moody's added, that based on pro-forma estimates, the combined financial profile of the group will also be stronger with both debt service metrics and cash-flow generation improving. On an illustrative combined basis TMX's current low leverage ratio of 0.5x would improve the combined group's leverage to approximately 1x.

The review will focus on the following parameters related to the combined group: 1) sustainability of gearing and interest coverage levels going forward, 2) analysis of the group's scale and cash-flow generation capability, and 3) the examination of the various medium to long-term strategic benefits and costs for the enlarged group.

The last rating action on LSEG was on February 16, 2009 when the outlook was changed from positive to stable.

The principal methodology used in rating the London Stock Exchange Group plc is the December 2006 Global Securities Industry Methodology, which can be found at www.moodys.com in the Rating and Methodologies sub-directory under the Research and Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Ratings Methodologies sub-directory on Moody's website.

Incorporated in England and based in London, London Stock Exchange Group plc reported total consolidated revenue of GBP633 million for the last twelve months ending September 2010.

Incorporated in Canada, TMX Group Inc. reported C$575 million (GBP362 million) for year-ending December 2010.

London
Marjan Riggi
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Johannes Wassenberg
MD - Banking
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's reviews for upgrade the Baa2 ratings of LSEG after merger announcement with TMX
No Related Data.
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