(March 29 – 11:45 ET) – The Toronto Stock Exchange and the Canadian Venture Exchange have agreed in principle to a transaction that would see the TSE acquire CDNX. It’s expected that the transaction will go to CDNX member-shareholders for a final vote by July 1.

Under the terms of the deal announced yesterday evening, the two capital markets will remain distinct with CDNX continuing to operate as a separate exchange, but as a wholly owned subsidiary of the TSE. The offer will see the TSE pay approximately $382,000 for each of the 131 outstanding shares of CDNX. This translates to a deal of $50 million.

In a statement to the media TSE president and CEO Barbara Stymiest said, “This combination helps the Canadian capital markets as a whole. Listed companies and brokerage firms at both exchanges will benefit from reduced costs, improved efficiencies and a stronger presence in key regional centres right across Canada.” She added: “Our businesses will bring a unified approach to issuers, helping a company through each stage of its growth. The TSE’s relationships with institutions, and its international profile, will immediately provide valuable exposure for Canadian venture companies.”

Under the agreement, local offices of CDNX in Vancouver, Winnipeg and Toronto will be maintained with the head office remaining in Calgary. A TSE presence will be added to these offices to extend services and better assists prospective, existing and graduating companies.

“This is a significant step in the continued growth of the public venture capital market in Canada,” said CDNX president and CEO, Bill Hess. “The benefits to CDNX-listed companies and the venture market as a whole is greater liquidity, a clear graduation path to the senior exchange and enhanced visibility.”

The agreement in principle consists of the two exchanges having a common board of directors, which will include five current CDNX directors. There will also be a CDNX advisory board to the TSE whose members have expertise in venture capital market. This board will advise on issues affecting companies listed on CDNX. Scott Paterson, current chairman, will chair the advisory committee for CDNX. Paterson will become a vice-chairman of the TSE board of directors.

It is expected the deal will take four to six months to complete and is subject to formal approval, CDNX member-shareholders approval and regulatory approval.