TMX shares rallied 4.6 percent on April 27, its biggest surge in 11 months, after the Competition Bureau said its “serious concerns” on the sale may be “substantially mitigated” by rules laid down by Ontario’s securities regulator governing operations of the exchange.
“People think it’s more realistic to get the tender offer,” said Edward Ditmire, a New York-based analyst at Macquarie Group Ltd. “It sounds like they’re getting to the end of the tunnel.”
Maple Group Acquisition Corp.’s C$3.73 billion ($3.78 billion) offer to buy the Toronto Stock Exchange owner expires today unless the deadline is extended. Maple plans to extend its offer today and all members are expected to remain in the group, the Globe and Mail reported, citing unidentified people. The bid has been extended six times as the buyers sought approval from provincial regulators and the Competition Bureau.
Ditmire called the Competition Bureau statement “encouraging” and said it improves the odds of a deal going through, which he previously pegged at “50-50.”
Still, TMX’s stock price suggests some investors remain skeptical of the offer from Maple, whose 13 members include Toronto-Dominion Bank (TD), Canada Pension Plan Investment Board and Manulife Financial Corp. (MFC)
TMX shares rose 40 cents to close at C$45.10 in Toronto. The shares are about 9.8 percent below Maple’s C$50-a-share offer. The premium is the widest of any billion dollar deal in the U.S. or Canada, indicating traders aren’t convinced Maple can get the approvals it needs, according to data compiled by Bloomberg.
“Investors in this transaction are getting nervous that we might see a block here, or Maple might walk away,” Yemi Oshodi, managing director of mergers and special situations trading at New York-based WallachBeth Capital LLC, said in a telephone interview.
Maple said April 27 that there’s “no assurance” that regulatory approvals can be obtained. Regulators may also demand changes to Maple’s proposal that may be unpalatable to its members, prompting them to abandon a transaction that’s been in the works for about a year.
“Deals don’t age like fine wine,” Oshodi said. “Anything that takes this long has some fundamental problem, and the only remedies are usually drastic.”
Extended Six Times
Maple has sought to buy Toronto-based TMX since May 13, after the TMX had already agreed to a friendly combination with the London Stock Exchange Group Plc. (LSE) The LSE deal fell apart in June after failing to get enough shareholder support. TMX, which initially rejected the Maple bid, began negotiations a month later and by Oct. 30 reached an agreement that carried an April 30 expiry date. Maple is in talks to extend the agreement because it won’t get regulatory approvals before the deadline.
“We expect to have an announcement before the current offer expires on April 30 at 5 p.m.,” Maple spokesman Peter Block said in a telephone interview.
Maple ultimately plans to buy all of TMX and integrate it with the Canadian Depository for Securities Ltd. clearing house and Alpha Group, a bank-owned company whose Alpha Exchange competes with TMX.
The Competition Bureau said Nov. 29 that it had “serious concerns” about the plan in connection with equities trading and clearing settlement. Those concerns may be eased after the Bureau provided “views and input” with the Ontario Securities Commission.
Ontario’s securities regulator will publish draft terms and conditions for a 30-day public comment period before making a final decision, Maple said. Quebec’s financial markets authority said March 15 that it intends to approve the proposed takeover. TMX also operates the Montreal-based derivatives market.
TMX spokeswoman Carolyn Quick declined to comment.
To contact the reporter on this story: Doug Alexander in Toronto at firstname.lastname@example.org