Maple likely to extend TMX bid, but terms in doubt

TORONTO Wed Sep 28, 2011 4:09pm EDT

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TORONTO (Reuters) - Maple Group, a consortium of Canadian financial institutions, will likely extend its C$3.8 billion ($3.7 billion) bid for the TMX Group beyond September 30, the deadline for shareholders in the Toronto Stock Exchange operator to tender their stock.

The consortium has made it clear that it would give shareholders more time to decide on the offer if regulators still had not ruled on the proposal by the end of September.

"As for the possible extension of the bid, yes, Maple is open to doing so," Peter Block, a spokesman for the consortium, said on Wednesday. "An announcement ... is expected to be made prior to the expiry of the current bid."

There is no reason to think an extension - the second in less than two months - means that the still-hostile bid is on the brink of failure. Even so, many believe Maple will have amend the terms of the deal before it will gain approval from competition and securities regulators. As a consequence, TMX's shares have soften in recent weeks.

"I do think momentum on the deal has muted and the financial terms may need to be revised," said Alison Crosthwait, director of global trading research at Instinet.

Maple may have a long wait. At the provincial level, securities regulators will have to invite the public to comment, and the federal Competition Bureau probably won't rule until after the provincial process is complete.

Behind the scenes, Maple is working to convince authorities that the deal is in the best interest of investors and the broader market.

Maple plans to merge Canada's biggest alternative exchange, Alpha Group, into the TMX, which has raised competition concerns, though Block said the group expects to get the necessary approvals "later in the fall."

The bid was originally a response to a friendly offer for the TMX by the London Stock Exchange (LSE.L).

Maple picked up on the concern of many Canadians that Toronto would lose clout as a financial heavyweight if it was taken over by the London, and in late June the LSE was forced to abort its plans when it became evident that it did not have enough shareholder support to win the day.

The Maple consortium, made up of four of Canada's largest banks, four top pension funds and one of North America's largest life insurers, is also working on getting TMX to give its blessing, spokesman Peter Block said.

TMX declined comment.

Maple's bid is for C$50 a share, and TMX's stock rose as high as C$45 a share this summer, but lately has hovered at around C$40.

Some market observers say the lag is likely due to the length of time it may take to complete the deal, but others say it points to questions about the integrity of the bid.

"If you were 100 percent sure that the bid was going to go through at C$50, then you'd see the stock price at C$49.90 or so, you wouldn't see it at C$40.00," said Laurence Booth, a professor of finance at the University of Toronto's Rotman School of Business.

"So that indicates there's significant uncertainly and significant expectations that they are going to revise their bid in some way."

Maple has said it is unable to comment on the talks with either the regulators, or the TMX.

In a Reuters poll just under three weeks ago, six of the eight major TMX shareholders said they were confident the deal would go through and plan to tender their shares, while two said that since the deal hinges on regulatory approval, there was no point in making a decision now.

The last time Maple extended its bid, on August 3, it said that "if the required regulatory approval process has not been completed by September 30, Maple's current intention would be to further extend its offer."

($1=$1.02 Canadian)

(Reporting by John McCrank; Editing by Frank McGurty)

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