TMX’s board authorized management and advisers to hold discussions with Maple Group Acquisition Corp. on its unsolicited C$3.73 billion ($3.95 billion) offer, the Toronto- based company said yesterday in a statement. The board “is making no recommendation to shareholders regarding the current Maple offer and there can be no assurance that any agreement or recommendation will result.”
The exchange operator changed its mind three weeks after TMX and LSE scrapped their agreement because they lacked enough support from shareholders. TMX had stuck with the London agreement from Feb. 9 even after Maple, whose backers include Toronto-Dominion Bank (TD) and Manulife Financial Corp. (MFC), offered more money on May 13 and raised its bid on June 22.
“If TMX management can’t come up with an agreeable proposal with the Maple consortium, they run the risk of shareholders tendering their shares to Maple regardless,” Ed Ditmire, an analyst with Macquarie Group Ltd. in New York, said in a telephone interview yesterday. “Then, of course, Maple would control the fate of the company.”
TMX Chief Executive Officer Thomas Kloet said June 30, the day after the LSE deal was terminated, that he would consider “all opportunities” including Maple’s cash-and-stock bid, which values the exchange owner at C$50 a share. Maple’s offer to buy at least 70 percent of TMX shares expires Aug. 8.
The stock has risen 0.8 percent to C$43.90 since the LSE agreement was dropped on June 29, and gained 19 percent in 2011, the fifth-biggest advance among 25 stocks in the Bloomberg World Exchanges Index.
Maple’s proposal requires approvals from provincial regulators including those in Quebec and Ontario, as well as Canada’s Competition Bureau.
“Having them on the same team, if they can come to an agreement, would in my view give them much better chances of getting those kinds of approvals,” Ditmire said.
Maple said yesterday in an e-mailed statement that it has signed a confidentiality agreement with TMX, which also owns Montreal Exchange, a derivatives market.
“We look forward to engaging in collaborative discussions with TMX Group,” Luc Bertrand, a Maple spokesman, said in the statement. “While there can be no assurance that these discussions will ultimately lead to a TMX Group Board supported transaction, the signing of this agreement and the commencement of discussions is a positive step.”
Maple’s 13 members also include the Canada Pension Plan Investment Board. In addition to buying TMX, Maple wants to purchase Alpha Group, a bank-owned trading platform that competes with the bourse, and clearing house CDS Inc. Alpha has captured about 19 percent of Canadian equities trading.
While TMX and Maple’s agreement to start talks could increase the odds of a deal, it may also bring changes to the proposed transaction, Ditmire said.
“You have to be open to the idea that that deal might be different than what the Maple proposal currently is,” he said.
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