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Urbana prepares to increase its equity in world's exchanges


Thomas Caldwell, the maverick Canadian broker who has been snapping up shares in stock exchanges around the world, is looking to raise $100-million for a new buying spree.

Urbana Corp., a closed-end fund whose voting shares are 49.7 per cent controlled by Mr. Caldwell, yesterday priced an offering of non-voting class A stock at $3.10 a share.

The latest offering also includes a share price warrant exercisable at $3.75 within two years of the closing, for the offering set for July 12. Urbana's A shares yesterday fell 10 cents to close at $2.95 on the Toronto Stock Exchange.

The shares reached a peak of $3.70 in February.

"We anticipate a major portion of the funds will be spent on pre-IPO exchanges - that is, companies that are still private," said Mr. Caldwell, who heads Toronto-based Caldwell Investment Management Ltd.

"We have access to buy these [exchanges], whereas individuals do not, because we can often get in as a strategic partner. We are pretty well regarded internationally in the exchange business."

Mr. Caldwell, who had acquired a major position several years ago in the New York Stock Exchange, was instrumental in pushing the NYSE to modernize and go public last year.

Urbana, which was originally incorporated in 1947 as a mineral exploration company, changed its business in 2005 to become an investment fund.

It raised $53-million through an offering of class A shares in January.

About 87 per cent of those proceeds were invested in private exchanges. They include the Bombay Stock Exchange Ltd., Chicago Board of Options Exchange, Kansas Board of Trade, Minneapolis Grain Exchange, Winnipeg Commodities Exchange, American Stock Exchange, Philadelphia Stock Exchange and Bermuda Stock Exchange.

Investments in public exchanges include Deutsche Boerse AG, Hong Kong Exchanges and Clearing, JSE Ltd. (Johannesburg Stock Exchange), London Stock Exchange and Singapore Exchange.

In the latest round of consolidation among bourses, WCE Holdings Inc., which owns the Winnipeg Commodity Exchange, agreed last month to be acquired by Atlanta-based IntercontinentalExchange Inc. for $62.08 a share.

Mr. Caldwell, who bought shares in WCE through Urbana and for other clients at about $40 a share, is still considering a rival bid, but has "made no decisions" yet.

"Typically, we are investors versus operators because there is so much to do around the world," he said in an interview.

For example, about $26-million from the last Urbana offering went to buy a stake in the Bombay Stock Exchange. "By owning the Bombay Exchange, we have a participation in the economic growth of India," he said.

"Whatever works well in the corporate world in India will eventually find its way on the National Stock Exchange [of India] or the Bombay Stock Exchange," he said.

"As companies grow, and they become larger, they are going to finance, and go public. All of that benefits the capital markets."

Some investments, such as in the Bermuda Stock Exchange, have been small, Mr. Caldwell said. "These are all private clubs, and you have to buy a membership before they show you around the club house ... You always end up with token investments first and then work your way into bigger investments later."

Mr. Caldwell would not disclose what other private exchanges he covets, but acknowledged it will be tough to get a piece of the Tokyo Stock Exchange.

"They are probably close to going public, and my sense is that they are going to be reluctant when they are so close to doing something with it."

The exchange business is attractive because some are going public, while there is still a "strong growth story" in the publicly traded ones. Others are going through a consolidation phase, he said.

"When they finally quiet down, they'll start to generate a lot of cash."

© 2007 The Globe and Mail. All rights reserved.

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