TMX takeover fight turns hostile

A consortium of Canadian pension funds and banks is taking its hostile $3.6 billion bid directly to TMX Group shareholders after the stock exchange operator accelerated a shareholder vote on its favoured plan to merge with the London Stock Exchange.

The Maple Group Acquisition Corp. announced late Wednesday it will soon mail shareholders its $48 per share proposal which represents a 24 per cent premium to the implied value of the merger with the LSE Group.

The outcome of the battle between rival bidders for the TMX Group will determine the future of the Canadian capital markets company, which runs the Toronto Stock Exchange, the Montreal derivatives market and the junior TSX Venture Exchange.

The move by Maple Group to go directly to shareholders comes after the TMX Group formally rejected a proposal from the Canadian consortium last Friday, saying the bid breeds too many uncertainties, including regulatory and debt risks.

Earlier Wednesday, the TMX also said it would accelerate a shareholder vote on its proposed $3 billion US merger with the London Stock Exchange. Shareholders at both exchange companies are set to vote on their merger June 30.

Maplewant talks with exchange

"We are disappointed that the TMX board declined our repeated invitations to engage us in discussions. Had they done so, we are confident that we could have addressed any questions or concerns they might have regarding our superior proposal," said Maple Group spokesman Luc Bertrand, vice-chairman of National Bank.

"By choosing not to do so, and now by accelerating the timing of their meeting to consider the LSE take-over, they have given us no choice but to make our offer available directly to TMX Group shareholders."

He added that Maple Group still wants to speak directly with TMX's board of directors, if it decides to negotiate. The TMX Group did not immediately respond to a request for comment.

The Maple group's bid must be accepted by 66 per cent of shareholders.The Maple g bid, announced earlier this month, is meant to keep TMX in Canadian ownership after many bank and government officials raised concerns about the so-called "merger of equals" with the LSE, which is technically a takeover by the British operator.

But the TMX Group is intent on pushing ahead with the London Stock Exchange transaction. The deal is subject to approval from various Canadian regulators, including a review from Industry Canada under the Investment Canada Act, which must determine if the merger is "of net benefit" to Canada.

Maple-TSX combo would control 80% of Canadian trading

However, the Maple bid is not without its own regulatory challenges.

It is dependent on a review by the Competition Bureau, which must rule whether the group can go ahead with plans to acquire the bank-owned alternative stock exchange Alpha Group and the CDS clearinghouse.

Any integration of the operator of the Toronto Stock Exchange and the alternative Alpha trading platform would give the group control of about 80 per cent of stock trading volume in Canada.

Bertrand said the group will begin the regulatory process "shortly," adding that he is confident that it can obtain all the required shareholder and regulatory approvals to close the deal by late fall.

Members of the Maple Group Acquisition Corp. include Alberta Investment Management Corp., Caisse de depot et placement du Quebec, Canada Pension Plan Investment Board, CIBC World Markets Inc., Fonds de solidarite des travailleurs du Quebec, National Bank Financial Inc., Ontario Teachers' Pension Plan Board, Scotia Capital Inc. and TD Securities Inc.