Maple launches formal $3.8 billion hostile bid for TMX

By Solarina Ho

TORONTO (Reuters) – A consortium of Canadian banks and pension funds took its $3.8 billion (C$3.7 billion) takeover offer directly to TMX Group shareholders on Monday, saying it was the best way to stop the country’s capital markets from falling into foreign hands.

Maple Group Acquisition Corp’s offer – presented in a formal circular – rivals London Stock Exchange Group’s friendly C$3.5 billion bid for TMX, the operator of the Toronto Stock Exchange.

The LSE is promoting its offer as building a transatlantic trading powerhouse that could compete on a global stage, but its critics say it would marginalize Toronto as a financial center.

The TMX takeover battle is part of a wave of consolidation sweeping the world’s top exchanges. Singapore Exchange (SGX) Ltd’s triggered a spate of deals last year with its failed attempt to buy Australia’s ASX Ltd.

Just a day after Maple added four more members, the consortium said it was standing pat on its offer price of C$48 a share in cash. But it said it would buy 70 percent of TMX shares, higher than the 60 percent floated in an informal proposal unveiled a month ago.

In an apparent peace gesture to TMX’s current management, Maple now says it would retain the current chief executive Tom Kloet and his team, as well as keeping existing commitments regarding TMX’s board.

TMX shares rose 1.39 percent in midmorning trading to C$44.41, suggesting some shareholders were encouraged by the Maple circular.

“Now that the Maple bid is out and they’ve improved it, but not really sweetened it, I think the TMX stock is already responding,” said Chris Damas an independent analyst who owns a sizable number of TMX shares. He says he now favors the Maple offer, given the information presented so far, but he would still like to see a higher price.

“To be honest, I really think this is a good deal for Canada. We should have control over a sensitive asset like the stock exchange,” he said.

Maple – comprising four Canadian leading banks, five top pension funds and four new institutional investors – insisted the proposal would promote competition in securities trading even as it would fold the biggest competitor to TMX’s exchanges into the group. A review by Canada’s Competition Bureau is one of the biggest concerns surrounding the Maple bid.


LSE’s planned takeover must pass muster with the Canadian government, which will decide if the deal carries a “net benefit” to Canada. Maple’s bid won’t face such a review because its members are all Canadian.

“We think we’re in quite good shape now,” TMX’s Kloet said on Friday, noting that the company was “in active dialogue” with the government over the deal.

Shareholders vote on the LSE-TMX deal on June 30, so the window is closing fast for Maple to convince investors that its proposal is the better deal.

“We encourage you to think critically about the case the LSE is making for its deal,” Luc Bertrand, Maple’s chief spokesman and vice-chairman of Quebec-based National Bank told shareholders and analysts on a conference call.

“We encourage you to think even more critically about the case they have been trying to make against our superior proposal.”

The $3.8 billion price is based on C$48 multiplied by the number of fully diluted shares, Maple said. A previous $3.7 billion value was calculated based on the number of basic shares outstanding.

“Nothing has changed, the $48 is a smokescreen – the only guarantee is $33 cash per share,” LSE Chief Executive Xavier Rolet said of Maple’s cash and stock offer. “This is a structure simply designed to give them control for cash upfront.”

In May, Maple said it would exchange each TMX Group share for C$33.52 in cash plus 0.3016 of a Maple share.


One issue of concern for shareholders has been the valuation of Alpha Group, Canada’s main alternative trading platform, as well the CDS clearinghouse. Maple says it will wrap into the TMX Group as part of the deal. [ID:nN13165210]

But Maple’s circular gave no price for the entities. It would form a special committee to reach a fair value.

Maple’s deal would give TMX control of some 80 percent of Canadian stock trading by volume, making a review by competition authorities crucial.

Nearly half of the group’s members, the four banks, one of the pension funds and one of its financial services firms, are part owners in Alpha.

Even so, Maple said the Alpha and CDSL transactions would benefit Canadian capital markets and not affect the competitive market for equities trading.

It said its own investors would sell their interests in Alpha and CDSL at whatever prices the committee recommends.

Maple Group added Desjardins Financial Group, GMP Capital Inc, Dundee Capital Markets and Manulife Financial to its ranks on Sunday.

Maple’s original bank members are the Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada and Toronto Dominion Bank.

The pension funds are Alberta Investment Management Corp, Caisse de depot et placement du Quebec, Canada Pension Plan Investment Board, Fonds de solidarite des travailleurs du Quebec (FTQ) and Ontario Teachers’ Pension Plan Board.