Canada Won’t Decide on TMX Before Investor Vote, LSE Says

London Stock Exchange Group Plc.'s David Lester
David Lester, director of information services and chief executive officer of Turquoise trading system for London Stock Exchange Group Plc. Photographer: Jeremy Bales/Bloomberg

David Lester, a London Stock Exchange Group Plc executive who met with Canadian government officials yesterday, said he doesn’t expect Industry Minister Christian Paradis to endorse or reject his company’s deal to buy TMX Group Inc. until after shareholders vote on June 30.

“They don’t want to politicize this process,” Lester, director of information services at LSE, said in an interview today at Bloomberg’s Toronto office. “They’re looking at the shareholder vote first and foremost.”

Canada’s federal government is required to review the C$3.36 billion ($3.45 billion) takeover under the Investment Canada Act to determine if the deal is a “net benefit” to the country. Lester said he met in Ottawa with staff of Industry Canada, as well as the Finance Department, and they indicated a decision will follow the shareholder vote, as well as reviews from provincial regulators including those in Ontario and Quebec.

“I feel confident that we’ve designed the right sets of incentives and packages and regulatory sovereignty framework that will get us through,” Lester said.

TMX backed the C$45.16-a-share all-stock purchase by LSE, while dismissing a C$48 a share cash-and-stock offer by a group of Canadian banks and pension funds. Maple Group Acquisition Corp., whose investors include Toronto-Dominion Bank and Canada Pension Plan Investment Board, proposed a C$3.58 billion takeover on May 13 to keep ownership of the Toronto Stock Exchange in Canadian hands.


“We’re selling the bid that we’ve got, and we think Maple is undeliverable,” Lester said. “I think shareholders need to recognize the certainty in our transaction is very high, and the certainty in the Maple transaction is practically next to zero, from a competition point of view.”

The Maple Group’s proposal doesn’t require Industry Canada approval because it’s not a foreign transaction, though it’ll face reviews by regulators and Canada’s competition bureau, the group said in a May 16 presentation.

“Maple extinguishes competition at every single layer of the value chain in an exchange, whether it be listings, whether it be trading, whether it be data, whether it be derivatives,” Lester said. “This will eradicate competition.”

Maple Group interim Chief Executive Officer Luc Bertrand called Lester’s comments “absurd” and said he’s confident that the Maple transaction can obtain all necessary approvals.

‘Absurd Statement’

“It’s an absurd statement, especially when the LSE is asking provincial securities regulators to abandon Canada’s public interest protection against any shareholder owning more than 10 percent of the exchange,” Bertrand said today in an e-mailed statement. “It’s also more than a bit presumptuous for the LSE to say what the Government of Canada will do.”

LSE and TMX submitted an Industry Canada application on April 29. The Industry Minister has 45 days to review the deal, which would have put timing of a decision into next week, though the process can be extended another 30 days. Richard Walker, director of communications for Paradis, said in an e-mail he is looking into the matter.

Ontario and Quebec’s regulators are reviewing requests by TMX and LSE to relax rules that prevent an investor from owning more than 10 percent of the company.

“I get the feeling if Ontario and Quebec are happy, I think the federal will look at the net benefit and then we should have our transaction,” Lester said.

Ontario Finance Minister Dwight Duncan said today in an e-mailed statement that regulators need time to review both transactions.

“There are important regulatory considerations with each deal and regulators need time to look at them carefully,” Duncan said in the e-mailed statement. “The 10 percent ownership rule for the TMX is critically important, as is the need for fair, efficient and cost-effective markets.”

Duncan also urged Industry Canada and the Competition Bureau to take the decisions of the provincial securities commissions into account.

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