* LSE adds cash to offer for Toronto Stock Exchange
* Now includes C$4 per share dividend
* TMX repeats rejection of competing Maple big
(Adds comments from TMX CEO; in U.S. dollars unless noted)
By Pav Jordan and John McCrank
TORONTO, June 22 The London Stock Exchange
(LSE.L) added cash payouts to its friendly bid for the operator
of the Toronto Stock Exchange on Wednesday, raising the value
to $4.1 billion and topping a $3.8 billion hostile offer from a
Just a week before TMX Group (X.TO) shareholders vote on
its proposal, the LSE added some C$660 million ($680 million)
to its bid in the form of special dividends of C$4 per TMX
share and 84.1 pence per ordinary share of the LSE, in an
effort to woo shareholders from both companies.
But it's not clear if the sweetener will be enough for TMX
shareholders, who are also looking at a cash-and-stock offer of
about C$48 a share, from the Maple Group of Canadian banks,
pension funds and financial services firms.
Alison Crosthwait, director of global trading strategy at
Instinet, which operates Chi-X, Canada's second-largest
alternative trading system, valued the new LSE proposal at
C$48.94 a share.
"They bested the Maple deal by almost a dollar," she said.
FACTBOX-Key players in TMX battle [ID:nN02238198]
INSTANT VIEW [ID:nN1E75L1DQ]
Graphic of TMX market share http:/r.reuters.com/kyd89r
TMX stock, halted pending the announcement, rose about 1
percent to close at C$44.25, even as some shareholders
questioned if the new offer was high enough.
"I think it's inadequate," said Richard Fogler, a
shareholder and president of investment firm Kingwest & Co.
"The LSE, by raising the bid, they've basically publicly stated
that they don't have the votes to win."
TMX said it was sticking to plans for a shareholder vote on
the LSE offer on June 30, putting pressure on Maple to react.
Maple had no immediate comment. But Thomas Caldwell, whose
firm Caldwell Securities holds TMX shares, expects the
consortium to sweeten its offer.
"This is a close-run deal," he said. "I think the other
side are going to come back with something more, something
different and something more clarified."
TMX also formally rejected the bid from Maple. It said
Maple failed to provide proof that its offer was superior and
the bid would result in significantly increased leverage for
the exchange operator.
TMX Chief Executive Tom Kloet said in an interview the
decision to sweeten the friendly bid showed the companies'
confidence in the deal and reflected discussions with TMX
"I thought we should show the confidence we feel in the
combined businesses," he said, calling the dividend rate change
the "right thing to do."
LONDON GETS A 55 PERCENT STAKE
Under the London offer, TMX shareholders will receive
2.9963 LSE Group shares for each TMX share, leaving LSE
shareholders with control of 55 percent of the new company. and
TMX shareholders with 45 percent.
But some shareholders said the promise of special dividends
just gives away future value.
"The special dividend looks nice but ... it's really
borrowing from Paul to pay Peter," said Chris Damas, an
independent analyst and TMX shareholder who plans to vote
against the LSE proposal.
A London banker who advises financial services companies
but is not involved in the deal described the move as "classic
M&A," and predicted LSE shares would open lower on Thursday.
LSE shares closed the day flat in London, at 957.35 pence.
Both takeover proposals will face regulatory hurdles.
The LSE offer needs approval from provincial regulators and
from federal Industry Minister Christian Paradis, who must
determine if the offer is of net benefit to Canada.
The LSE and TMX say they plan to create a transatlantic
partnership with a strong position in mining and resource
firms. Opponents say it puts a crucial Canadian asset in
The Maple deal, billed as a made-in-Canada solution, would
have to pass anti-trust muster because its combination would
give the new firm control of more than 80 percent of Canadian
(Additional reporting by Andrea Hopkins, Solarina Ho, Euan
Rocha and Victoria Howley; editing by Janet Guttsman)