NEWSMAKER-Maple Group taps insider to front its TMX proposal

Tue May 17, 2011 3:20pm EDT

* Bertrand was architect of deal that created TMX

* Says proposal is logical for TMX growth

By Pav Jordan and John McCrank

TORONTO, May 17 (Reuters) - An insider with a raft of political connections is steering a proposed C$3.6 billion made-in-Canada takeover of the country's largest exchange operator as Canadian banks fight off a foreign bid.

Luc Bertrand, who helped create the TMX Group (X.TO) in 2008, wants to derail a $3 billion offer from the London Stock Exchange (LSE.L) and keep Canada's biggest stock market in Canadian hands.

As spokesman for Maple Group Acquisition Corp, named for Canada's Maple Leaf flag and set up solely to bid for the TMX, he says he wants to move the exchange operator to a new level by merging it with Alpha, a bank-owned alternative trading system that has taken away TMX market share.

"He's very astute and he understands the exchange world," said Georges Ugeux, chief executive of Galileo Global Advisors, a New York-based, cross-border merger advisory firm that worked on several past exchange deals.

"They will succeed on the basis of the premium, and on the basis that this deal just wouldn't have happened without power behind it." <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

FACTBOX: Next steps for the LSE [ID:nLDE74G14O]

TIMELINE: The Maple has landed [ID:nLDE74G235]

DEALTALK: Maple, LSE arguments [ID:nLDE74G1L7]

FACTBOX: Global exchange merger activity [ID:nLDE74F1BL]

BREAKINGVIEWS: Canada's homegrown TMX bid [ID:nLDE74F0M8] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

The well-connected Bertrand is point man on government and corporate affairs at National Bank of Canada (NA.TO), the smallest of four Canadian banks in the Maple consortium.

Five pension funds have joined the banks in a proposal that Bertrand said had been under discussion for a while.

"When the LSE came out with its offer, it got many of us on the phone talking to each other and kicking around the old idea that we've had for a long time," he said.

Maple's proposal would circle Bertrand back to the TMX, a company he helped create when the Toronto Stock Exchange acquired the smaller Montreal Exchange in 2008, although he says he has no plans to leave National.

Bertrand, 56, had been chief executive of the Montreal exchange but the TMX board passed him over when it picked current CEO Tom Kloet to head the exchange.

He is on first-name terms with many of Canada's regulators and has links to Ottawa that date back to the late 1970s, when he became a parliamentary assistant right out of university.

"It's been a large percentage of my career, talking with the regulators, and I know many of them and I know the regulatory process," Bertrand told Reuters on Tuesday.

DOMESTIC CONCERNS

The Maple proposal needs approval from Canada's independent Competition Bureau and provincial securities commissions. But unlike the LSE offer, it does not need approval from provincial regulators or from Canadian Industry Minister Tony Clement.

The LSE says its all-stock proposal will create a Transatlantic powerhouse that will be particularly active in mining and minerals, two of the TMX's strongest suits.

But the bid has faced a nationalistic backlash from Canadian politicians and businessmen, who say it would leave a domestic crown jewel in foreign hands.

The Maple proposal, for its part, would create a group that controls more than 80 percent of Canadian stock trading by volume, a near monopoly that analysts say could be hard to get past regulators.

Bertrand dismissed that concern.

"This idea, this concept, it's not brand new," he said in an interview, describing the Maple Leaf proposal as the "next logical step" to the Toronto-Montreal combination.

"In creating a silo model for the TMX Group, there is huge opportunity to create growth, provide better service, and run a company more efficiently, and that will be good for everybody, not only shareholders, but for the Street and the users"

Bertrand said the Maple Group wants to build TMX into a vertically integrated exchange group that offers a one-stop shop for trading and clearing in a series of asset classes.

TMX owns the TSX Venture Exchange for small-cap stocks and the Montreal Exchange for derivatives trading as well as the Toronto Stock Exchange.

Bertrand spent nearly eight years building the Montreal exchange into a profitable derivatives bourse of global standing after an early career that included stints as a parliamentary aide, a political analyst and a stockbroker.

He is part-owner of the storied Montreal Canadiens hockey team, after buying into the National Hockey League franchise in 2009.

He joined National Bank this year.

"You really have to dig deep to find the motivation of the banks for doing this," said Thor Koeppl, an economic professor at Queen's University in Kingston, Ontario, injecting a note of skepticism to the debate.

"On the trading side, the only the way I can rationalize this bid by the banks is they are kind of freaked out over losing business, losing revenues, essentially through fees." (Additional reporting by Jonathan Spicer and Solarina Ho; Editing by Janet Guttsman and Frank McGurty)