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National Bank’s Bertrand Returns to Roots in TMX Counterbid

National Bank’s Luc Bertrand
National Bank’s Luc Bertrand. Photographer: Norm Betts/Bloomberg

Three years after being passed over to head Canada’s largest stock exchange, Luc Bertrand is back, leading a group of banks and pension funds trying to keep TMX Group Inc. in Canadian hands and thwart a bid from the London bourse.

Bertrand has become the public face for Maple Group Acquisition Corp. in its unsolicited C$3.6 billion ($3.7 billion) offer to buy the Toronto Stock Exchange owner. Though the group includes four of the country’s biggest banks, and pension funds with C$450 billion in assets, Bertrand has done all the talking since the bid was announced last weekend.

“The whole exchange space is one where I’ve had personal interest for a long time,” Bertrand said in an interview yesterday in Toronto, after leading two conference calls with analysts and reporters. “I’m very happy to be involved in helping to build this arrangement.”

Bertrand, 56, who led the Montreal Exchange for almost a decade before leaving the industry in 2009 after failing to win the job as TMX’s chief executive officer, is in familiar territory.

During his tenure at the Montreal bourse, he pushed to turn the exchange, which had inherited most of the country’s derivatives contracts trading, into a for-profit company. The firm went public in 2007.

‘Unique and Innovative’

“His demutualizing of the Montreal Stock Exchange was unique and it was innovative,” said Tom Caldwell, whose Toronto-based money management firm invests in global exchanges. “Clearly Luc, as CEO at the time, can take credit for that.”

When the Toronto Stock Exchange agreed to buy Montreal Exchange for about C$1.3 billion, Bertrand was considered by some analysts as a candidate to become CEO after Richard Nesbitt left the firm in January 2008 for Canadian Imperial Bank of Commerce. Bertrand was bypassed when TMX hired Thomas Kloet for the top job in June of that year. Bertrand left his post as deputy CEO a year later and joined Montreal-based National Bank of Canada as a vice chairman this year.

During his time at the TMX, Bertrand felt there was an opportunity to expand the Canadian exchange owner into something bigger, with trading and clearing “siloed” in the same company. Under the Maple bid, TMX plans to merge with Alpha Group, an alternative equity trading system, and CDS Inc., the securities clearing house owned by the banks, TMX and the Investment Industry Regulatory Organization of Canada.

London Catalyst

“For me, it’s always been something in my mind to see the TMX developed into a major silo,” said Bertrand, who is TMX’s largest individual investor, owning 737,000 shares worth about C$32 million, according to Bloomberg data. “This is the opportunity to do it.”

The catalyst for Bertrand’s involvement with Maple was London Stock Exchange Group Plc’s Feb. 9 bid to buy the Toronto Stock Exchange owner, which came two days after he started at National Bank.

LSE’s proposal to buy TMX Group for about C$3.2 billion in stock prompted talks between Bertrand and National Bank CEO Louis Vachon, a former Montreal Exchange board member, about the future of Canada’s markets.

“The discussion expanded with other broker-dealers on the street,” Bertrand said. “At the end of the day, we decided that -- after lots of analysis and work -- that we could build a better, superior proposal to the LSE proposal,” he said.

Alternative Bid

Bertrand and a group of banks expressed their concerns about the LSE deal in March, appearing before an Ontario legislative committee and in media interviews and public speeches.

“I would say Luc was one of the drivers” of this bid, said Caldwell, CEO of Caldwell Securities Ltd. “He’s always had an interest in the exchange space.”

The firms behind the bid, including Toronto-Dominion Bank, CIBC and National Bank, spent the next two months working on an all-Canadian alternative to the LSE takeover, he said.

Bertrand said the Maple bid is superior to the LSE deal because it’s primarily in cash; offers a premium to the LSE bid; keeps the company based in Canada; preserves jobs and makes TMX better positioned to pursue international acquisitions.

Under the Maple plan, TMX shareholders would get C$33.52 in cash plus 0.3016 of a Maple share for each TMX share. The group, which was created for this bid, would pay as much as C$2.5 billion in cash under the proposal, which is about 15 percent higher than the offer from the London bourse.

Antitrust Review

Though the bid doesn’t require a foreign investment review, it will face an antitrust probe because the TMX and bank-owned Alpha control a combined 88 percent of Canada’s equity trading market.

TMX fell 68 cents, or 1.5 percent, to C$43.37 at 4 p.m. in Toronto, below the Maple bid of C$48 a share, suggesting investors aren’t convinced the deal will get done.

Bertrand, raised near the Quebec border in Cornwall, Ontario, has been a senior executive in the Quebec business community for more than a decade. He held a position at National Bank in 1998 before becoming president and CEO of Montreal Exchange in March 2000. He’s also a minority owner in the Montreal Canadiens of the National Hockey League, having bought an undisclosed stake when a group led by Montreal’s Molson family acquired the club in 2009.

Bertrand said he’d welcome the opportunity to serve in a governance capacity at TMX, perhaps as a board member, if the Maple Group bid succeeds. He’s not interested in being the boss.

“I’m very happy as vice chairman of National Bank,” he said. “It’s exciting, I work with very bright people, fun people, and I have no plans whatsoever to accept a position elsewhere.”

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