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TSX-MX Merger Freebee

The Toronto Stock Exchange (TMX) and Montreal Exchange (MX) announced today that they are merging to form Toronto Montreal Exchange (TMX).

I had purchased shares of MX a few months ago in anticipation of this event. Given the consolidation in the world exchanges (e.g. NYSE Euronext), it was plain to me that this merger was inevitable.

I thought MX would either merge with TSX or get taken over by New York Mercantile Exchange (Nymex) which already owns 10% of MX. This has yielded an almost risk-free profit of nearly 30% in less than 4 months (or 123% annualized).

I don't think TMX can stay independent for too long. I wouldn't be surprised if TMX eventually gets taken over by private equity groups or other larger exchanges. However, I don't think this will happen in a matter of few months, but rather a couple of years.

TSX will pay me $13.95 in cash for my MX shares, plus 0.5 share of TSX Group for every 1 share of MX. I will keep the new shares for another freebee when TMX gets taken over :)

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