Maple steps up with new TMX offer

The Canadian consortium looking to buy the TMX Group Inc. has officially launched its $3.7-billion hostile bid, pitching it as a stronger platform for growth compared with a friendly merger with the London Stock Exchange Group.

Luc Bertrand, Maple Group spokesman and vice-chairman of National Bank Financial, said the TMX is a global leader for resource company listings and called the TSX Venture Exchange a "powerhouse" for small cap companies.

"Our vision at Maple is to build on these strengths rather than shore up the LSE's weaknesses," Bertrand said.

Bertrand said much as been made about the transatlantic deal helping companies to more easily list on both the Toronto and London markets.

"This is an old argument that others have used in the past, but the evidence simply does not support it," he said.

"Canadian companies are free to cross-list on the LSE today, but less than one half of one per cent have decided to do so. Secondly, the research indicates that cross-listing does not create value."

For the Maple deal to go forward, TMX shareholders must vote down the proposed merger with the London Stock Exchange Group at a meeting on June 30.

Richer cash component

TMX acknowledged the formal offer Monday and said it would review the bid, which is richer than the $3 billion US estimated value of the LSE transaction.

"The board will also reassess whether the Maple formal offer constitutes a superior proposal, or could reasonably be expected to result in a superior proposal," the company said.

TMX had rejected a similar offer proposed by Maple in May.

The proposed Maple deal on Monday offers to buy 70 per cent of TMX for $48 per share, and includes a process that will see current TMX shareholders receive a 40 per cent stake in the new company in exchange for their remaining shares.

Maple investors would end up holding the remaining 60 per cent.

Thirty-one per cent would be held by the five pension funds involved in the deal including Alberta Investment Management, Caisse de depot et placement du Quebec, Canada Pension Plan Investment Board, Fonds de solidarite des travailleurs du Quebec and the Ontario Teachers' Pension Plan.

The four bank-owned investment dealers in the group including CIBC World Markets, National Bank Financial, Scotia Capital and TD Securities will hold a total of 22 per cent.

And Desjardins Financial Group, Dundee Capital Markets, GMP Capital and Manulife Financial, which joined the group on the weekend, would hold together hold the remaining seven per cent.

The group said individual members of the consortium wouldn't own more than 10 per cent of the new company's shares, in keeping with current regulatory requirements.

Widely held

Under its current ownership structure, TMX Corp. is one of the most widely helds stocks in Canada, with the largest single shareholder being CI FInancial. (Scotiabank, in turn, owns more than 36 per cent of CI).  Only five entities individually own more than one per cent of the current TMX Corp.

The Toronto-London merger deal would see TMX shareholders receive 2.9963 shares in the new company for each TMX share to give them a roughly 45 per cent stake in the merged stock exchange operator.

Maple has been moving forward with its offer to acquire TMX Group, which owns the Toronto Stock Exchange, Montreal derivatives market and other securities markets.

The bid reflects continued consolidation in global financial markets as stock exchanges bulk up and buy each other to better compete in attracting new listings and invest in technology.

Bertrand said the consortium has already had initial meetings with regulators about its offer and the required approvals.

However, the TMX board rejected the bid, saying it breeds too many uncertainties, including regulatory and debt risks.

The TMX-London merger will require approval by the federal government under the Investment Canada Act, which requires such deals to be a "net-benefit" to Canada. It also requires approvals from several provincial regulators.

The announcement also outlined the board members, should the deal go forward. The list includes executives from across the Maple team, including Bertrand, as well as Marie Giguere, executive vice-president at the Caisse.

Also on the list are Frank McKenna, deputy chair of Toronto-Dominion Bank, Jim Prentice, senior executive vice-president at CIBC, Bill Royan of the Ontario Teachers' Pension Plan and Kevin Sullivan from GMP Capital Inc.

George Gosbee, vice-chairman of Alberta Investment Management Corp. as well as president and CEO of AltaCorp. and a member of the Chrysler Group board, would also serve on the new board.

TMX shares were up 62 cents at $44.42 on the Toronto Stock Exchange.