* ISS, Glass Lewis have recommended LSE bid
* Shareholder vote scheduled for June 30
* Proxies due in on Tuesday, June 28
By Pav Jordan and Andrea Hopkins
TORONTO, June 28 Endorsements from leading
proxy advisory firms could become the London Stock Exchange's
(LSE.L) secret weapon as it bids for the widely held TMX Group
(X.TO), operator of the Toronto Stock Exchange.
But it's still not clear if the deal's backers will muster
the two-thirds of the shares they need for the C$3.6 billion
proposal to go ahead, or if shareholders will prefer a C$3.8
billion hostile offer from Maple Group, a consortium of
Canadian banks and pension funds.
A "No" vote for LSE at a shareholder meeting on Thursday
means the Maple offer proceeds to its own shareholder vote. A
"Yes" vote kills Maple's offer and leaves the LSE's friendly
takeover in regulators' hands.
"There are two big proxy firms that have recommended the
LSE/TMX merger, and that's a big plus for that merger," said a
high level Canadian competition lawyer who could not be quoted
by name due to his firm's policy.
"There are a lot of mutual fund companies and others that
listen to these firms because it gives them a kind of
protective cloak to vote in favor of a merger."
The takeover battle for TMX Group has become increasingly
polemic, raising a debate about how Canada should react to a
race for growth among global exchanges.
Canada's Conservative government, which has veto rights
over the LSE proposal, has stayed silent on the merits of the
two offers. But the opposition New Democratic Party said it
will outline its concerns about the LSE bid on Wednesday.
The Liberals, the third largest party in Parliament, said
in a letter to Industry Minister Christian Paradis that the LSE
deal could lead to a sell-off of Canada's largest exchange to
"To be fair to shareholders, it is vital that you consider
the Maple offer in determining which course of action is most
likely to provide a net benefit to Canada," the party wrote.
The LSE bills its mostly-stock proposal as a merger of
equals and promises to create a transatlantic exchange that
would be a powerhouse of mining and energy listings.
The Maple Group, whose all-Canadian members include four
major banks, five huge pension funds and North America's top
life insurer, says in an unashamedly nationalistic proposal
that it will keep a crucial domestic asset in Canadian hands.
Glass, Lewis & Co, a major U.S.-based advisory firm,
recommended for a second time on Tuesday that TMX shareholders
vote in favor of the LSE offer at Thursday's 10 a.m. EDT (1400
GMT) meeting. The meeting is timed to coincide with a parallel
decision from LSE shareholders.
Both sides sweetened their bids last week.
Proxies for the June 30 vote are due in on Tuesday, and
supporters and critics on all sides have come out this week in
an eleventh hour effort to rally shareholders.
The updated report from Glass Lewis comes a day after the
LSE and TMX said a total of five proxy advisory firms have
recommended its offer, including Institutional Shareholder
Services and three European firms.
"On the balance, despite improvements to Maple's offer,
which we believe make this an even closer call than before,
when compared to the enhanced LSE proposal and weighed against
the risks that remain in each proposal, we ultimately believe
the LSE-TMX merger remains the best alternative for TMX
shareholders," Glass, Lewis & Co said.
Chris Damas, an analyst and TMX shareholder who opposes the
LSE bid, said it was unclear to what extent shareholders will
follow the proxy firms recommendations.
"I think it will be close, but 40 percent of the stock is
held in the U.S. ... so all this discussion of what Canadians
are going to do is pretty irrelevant," he said.
(Additional reporting by Allison Martell, Solarina Ho and
Randall Palmer; Editing by Janet Guttsman)