TMX's hostile bidder would prefer its consent

TORONTO Thu Jul 14, 2011 4:53pm EDT

A Toronto Stock Exchange (TSX) logo is seen in Toronto November 9, 2007. REUTERS/Mark Blinch

A Toronto Stock Exchange (TSX) logo is seen in Toronto November 9, 2007.

Credit: Reuters/Mark Blinch

TORONTO (Reuters) - A Canadian consortium would rather woo TMX Group then press forward with its hostile takeover bid, but it says it will do whatever it takes should talks with the Toronto Stock Exchange operator break down.

Maple Group Acquisition Corp says it would like to strike a friendly deal with TMX and believes its C$3.8 billion ($3.96 billion) offer in cash and stock is compelling.

The 13-member consortium says it has no plans to change its $50-a-share bid while it pursues a three-track strategy of engaging TMX management, soliciting shareholders and working with competition authorities to win their approval.

"There haven't been formal, sit-down negotiations across the table from the (TMX) board, but there's been information exchanged. There's been informal discussions through advisers and others," said Maple spokesman Peter Block.

"We are open to working with the TMX and we hope to complete a transaction with TMX support, while being fully committed to following through on our offer," Block said, who added that talks with investors have gone well.

The TMX takeover battle took a decisive turn late last month when the London Stock Exchange Group abandoned a friendly proposal to combine the two companies because of insufficient shareholder support.

The LSE deal was announced in February, around the same time Germany's Deutsche Boerse AG unveiled its $9.7 billion bid to take over NYSE Euronext, operator of the New York Stock Exchange. Shareholders approved that deal on Thursday, taking a big step toward the creation of the world's largest exchange operator.

It was the first of a series of proposed takeovers involving exchange operators that made it that far, though the deal must still clear formidable antitrust hurdles on both sides of the Atlantic.

AUGUST DEADLINE

Maple, comprised of 13 Canadian financial institutions, will need 70 percent of shareholders to tender their shares by August 8. But it could extend that deadline, Block said.

Shareholders may have little option but to vote in favor of the deal. Analysts have questioned whether the participation of four of Canada's top six banks in Maple Group may scare off potential white knights.

RBC Capital Markets analyst Geoffrey Kwan said in a research note this week that he saw few global exchange targets that would make strategic sense for TMX.

But independent analyst Chris Damas says a dark-horse bidder could emerge if Maple fails to win sufficient support.

Still, analysts say shareholders may find it difficult to resist the premium over the current stock price that Maple is offering. TMX was trading at C$43.75 on Thursday afternoon, compared with the C$50 bid price.

Perhaps the biggest hurdle for Maple is getting past Canadian competition authorities. The deal envisions the integration of the Toronto exchange with its largest competition, the Alpha Group.

The Competition Bureau does not tend to block deals outright, extracting concessions instead.

Some worry that a TMX-Alpha combination would give the exchange's biggest users too much control of the Canadian stock market.

(Editing by Frank McGurty)