* Maple raises cash offer to C$50 a share from C$48
* Maple values its deal at C$3.8 billion ($3.9 billion)
* Higher bid follows LSE dividend sweetener
(Recasts with sweetened Maple bid)
By Pav Jordan and Euan Rocha
TORONTO, June 22 A consortium of Canadian banks
and pension funds raised its hostile bid for the operator of
the country's biggest stock exchange on Wednesday, with a
cash-and-stock proposal that nudged ahead of the London Stock
Exchange's (LSE.L) just-sweetened, friendly bid.
In an announcement hours after the LSE added a cash
component to its offer in the form of dividend payouts to
shareholders of both exchanges, the Maple Group said it raised
its cash and stock offer to C$50 a share from C$48.
It said it would increase the number of TMX shares to be
purchased for cash to a maximum of 80 percent, from 70 percent,
and valued its bid at C$3.8 billion ($3.9 billion).
"Obviously our quick response sends a powerful message to
them that we are in this to win," a Maple source told Reuters.
The source, who was not authorized to speak on the record,
asked not to be identified.
FACTBOX-Key players in TMX battle [ID:nN02238198]
INSTANT VIEW [ID:nN1E75L1DQ]
Graphic of TMX market share http:/r.reuters.com/kyd89r
The London and Canadian exchanges say their tie-up will
create a Transatlantic stock trading powerhouse with a
particular specialization in minerals and raw materials
companies, the existing strength of the Toronto Stock
But critics said it would propel a key Canadian firm into
foreign hands, and Maple played an unashamedly nationalistic
card in tipping its bid as a made-in-Canada solution.
In a brief statment, TMX said it acknowledged the new Maple
offer and would review it.
The LSE sweetener, announced on Wednesday afternoon, came
in the form of special dividends of C$4 per TMX share and 84.1
pence per LSE share, in an effort to woo shareholders from both
companies. Analysts said it was worth just under C$49 a share.
"I always did feel that the Maple deal was a better deal
than the LSE offer and this just makes it more attractive,"
Chris Damas, an independent analyst and TMX shareholder, said
after Maple announced its higher offer.
The Maple offer is contingent on shareholders rejecting the
LSE proposal at a shareholder meeting scheduled for June 30.
Maple also wants to wrap in Alpha, Canada's largest
alternative trading platform, and clearing house CDS, both of
them largely owned by financial institutions that are a part of
the Maple Group.
That will give Maple more than 80 percent of Canadian stock
trading and make the offer subject to anti-trust review.
Damas said he would be more satisfied if Maple removed the
clause that ties the deal to regulatory approval of the Alpha
acquisition -- a likely stumbling block.
"This gets us close to there. I would like the offer more if
they drop Alpha and CDS as requirements to close the deal."
Maple said the increased cash purchase price will be funded
entirely by additional proportionate equity investments by its
13 members, a consortium of four of Canada's biggest banks,
five pension funds and four financial services firms.
It said it would be willing to negotiate a break-fee in
case regulators reject its offer, a response to a TMX complaint
that shareholders were being forced to assume all the risk in
the proposed transaction.
TMX stock, halted pending the LSE announcement, rose about
1 percent on Wednesday C$44.25, and some shareholders
questioned if the new LSE 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."
Formally rejecting Maple's previous bid earlier on
Wednesday, the TMX 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 told Reuters that the
decision to sweeten the friendly bid showed the companies'
confidence in the deal and reflected discussions with TMX
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.
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.
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.
(With additional reporting by Andrea Hopkins, Solarina Ho and
Victoria Howley; editing by Janet Guttsman)