UPDATE 3-Maple Group adds four new partners to TMX bid

Sun Jun 12, 2011 5:11pm EDT

 * Desjardins, GMP, Dundee, Manulife Financial join Maple
 * Hopes to top friendly offer from London Stock Exchange
 * Some say addition demonstrates show of support for Maple
 * New members needed to cut conflict of interest - analyst
 (Adds comments, details)
 By Solarina Ho
 TORONTO, June 12 (Reuters) - Four more financial
institutions have joined Maple Group Acquisition Corp's plan to
mount a hostile bid for the TMX Group (X.TO) and top a friendly
offer from the London Stock Exchange Group (LSE.L), the
consortium of Canadian banks and pension funds said on Sunday.
 Desjardins Financial Group, GMP Capital Inc (GMP.TO),
Dundee Capital Markets DCM.TO and Manulife Financial (MFC.TO)
have agreed to join Maple's C$3.6 billion (US$3.7 billion) bid
for the operator of Canada's main bourse.
 Maple Group, which takes its name from Canada's patriotic
maple leaf symbol, says its offer is financially superior to
the roughly US$3.4 billion all-stock bid from the London
exchange and would keep ownership of the TMX within the
country's borders.
 The new partners would own 7 percent of the new entity,
while the original pension funds' share would be reduced to 31
percent from 35 percent. The original banks' ownership would be
cut to 22 percent from 25 percent. TMX Group investors would
still own 40 percent.
 Maple's original bank members are Toronto Dominion Bank
(TD.TO), Canadian Imperial Bank of Commerce (CM.TO), National
Bank of Canada (NA.TO) and the Bank of Nova Scotia (BNS.TO).
 Five pension funds also form part of the original group:
Alberta Investment Management Corp, Caisse de depot et
placement du Quebec, Canada Pension Plan Investment Board,
Fonds de solidarite des travailleurs du Quebec (FTQ) and
Ontario Teachers' Pension Plan Board.
 Maple, which is expected to take its hostile bid to TMX
shareholders any day now, has less than three weeks to convince
investors its "all-Canadian" alternative is better for the
country's capital markets. Shareholders will vote on the
TMX-LSE deal on June 30.
 Maple's new partners also tout what they see as the
benefits of Maple's proposal to Canada's small- and mid-cap
companies and to Montreal, Quebec, home to TMX's Montreal
Exchange for derivatives.
 "We believe Maple's vision ... includes a real commitment
to further Montreal's position as a center of financial
excellence," Monique Leroux, chief executive of Desjardins,
Canada's largest cooperative financial group, said in a
statement.
 With a number of Maple members based in the French-speaking
province and Luc Bertrand, vice-chairman of Quebec-based
National Bank, acting as Maple's chief spokesman, Quebec may
prove influential.
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  FACTBOX-Key players in TMX battle          [nN02238198]
  TIMELINE-TMX takeover battle http:/r.reuters.com/qez89r
  Graphic of TMX market share  http:/r.reuters.com/kyd89r
  ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
 The Maple bid -- which partly hinges on regulatory approval
of the acquisition of Alpha Group, Canada's leading alternative
trading system, and the CDS clearinghouse -- will face
antitrust scrutiny, as the Alpha/CDS component of the proposal
would give the new entity a big share of the Canadian market.
 Six of the 13 Maple members are owners of Alpha, which
competes with TMX's Toronto Stock Exchange. Integrating Alpha
would give TMX more than 80 percent of the trading market.
 SHOW OF SUPPORT VS CONFLICT OF INTEREST
 Investors who spoke to Reuters in a recent poll signaled
that the outcome remained uncertain, with many hoping Maple's
circular would provide more details on its bid.
[ID:nN02266428]
 Last week, Alpha chief executive Jos Schmitt told Reuters
that additional Maple members would demonstrate a show of
support to investors, a sentiment previously expressed by
others.
 Not everyone is convinced, however.
 "It's two steps forward and five steps back," said Renee
Colyer, chief executive of markets consultancy Forefactor,
adding that should the Maple deal go through, it would create
another monopoly market with "too many conflicts to count".
 "I knew they'd bring in others -- they have to. They are
trying to reduce the conflict of interest by bringing in more
players, increase the dollar amount they have to change the
deal and demonstrate to the government how many firms want
Canada to be a closed market."
 While Maple faces Canada's Competition Bureau, the LSE bid
must win approval under the Investment Canada Act, which
requires foreign takeovers to provide a "net benefit" to
Canada. Provincial regulators also have a say, but those
hurdles are considered less onerous.
 The LSE offer price is based on the exchange's closing
price on Friday.
 (Additional reporting by Allan Dowd in Vancouver; Editing by
Dale Hudson)


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