* TMX, Maple talks could lead to friendly deal
* Competition Bureau reviewing Maple's C$3.8 bln offer
* Aug. 8 deadline to tender shares seen being extended
By Solarina Ho
TORONTO, July 22 Talks between Toronto Stock
Exchange operator TMX Group (X.TO) and a consortium of Canadian
financial heavyweights could result in the former adversaries
reaching a friendly deal that would help overcome key
The TMX board said on Thursday it authorized official
discussions with Maple Group Acquisition Corp, nearly a month
after the London Stock Exchange (LSE.L) abandoned a friendly
takeover offer that failed to generate enough shareholder
"If TMX and Maple got together, if they were to agree on
something, whatever they agree on would probably have a better
chance of passing competition reviews in Canada," said Ed
Ditmire, an analyst with Macquarie Capital in New York.
The Competition Bureau is reviewing Maple's offer, which
includes plans to integrate the Toronto Stock Exchange with the
Alpha Group alternative trading system (ATS), the TSX's largest
The move would result in the combined entity controlling
more than 80 percent of Canadian stock trading and has raised
concerns it would give TMX-Alpha too much power over listing
Earlier this week, the bureau requested more information to
complete its review of the proposed deal. [ID:nL3E7II3A4]
"It is inconceivable it should be an issue for the
competition bureau, given other (ATS) players such as Chi-X and
PureTrading could fill any void," said independent analyst
Damas, who supported Maple's hostile offer of C$50 a share
in cash and stock, totaling C$3.8 billion ($4.02 billion),
expressed concern instead over whether the board make-up of a
combined entity would be able to comply with existing laws,
given the number of directors that will come from Maple and
"I really think this is the crux which will make or break
this deal," he said.
FINDING A MIDDLE GROUND
Maple, a 13-member consortium that includes some of the
country's biggest banks and pension funds, pitched itself as an
all-Canadian solution to keeping TMX in Canadian hands. But its
takeover of the nation's main stock exchange, as well as the
related TSX Venture Exchange and the Montreal Exchange
derivatives bourse, does not sit well with many independent
"It's not as simple an issue as people let out to be," said
Thomas Caldwell, chairman of Caldwell Securities, who conceded
that Maple's competition hurdles were not insurmountable.
"It's about some major institutions basically trying to
gain control of the pricing mechanisms. So from that
perspective, let's call a spade a shovel here. It's actually a
remutualization (of the TMX) with a little bit of window
Caldwell, who has not been shy about his opposition to the
Maple offer and the nationalist rhetoric surrounding the deal,
said he was "open" to Maple should the two sides find a middle
ground that addressed concerns over access, pricing, and a
promise by Maple's key members to eventually reduce their
ownership over time.
With dialogue starting just two weeks before the Aug. 8
deadline for investors to tender their shares to Maple's offer,
some speculate the date could be extended as the two sides try
to find a middle ground.
"It's a beginning ... The board has to engage Maple, but
there's no love between (Maple's) Luc Bertrand and (TMX's Tom)
Kloet," said Damas, who predicts the offer period for investors
will likely be extended, given the laundry list of concerns
that needed to be ironed out.
"The board is ... walking a fine line between doing their
fiduciary duty and catering to executive management that might
have some problems with the Maple takeover."
Among TMX's biggest concerns has been the amount of debt
Maple would bring to the table. Some say Maple is keen to have
Royal Bank of Canada (RY.TO) and Bank of Montreal (BMO.TO) --
who had been advisers in the LSE-TMX deal -- join the
consortium. The equity they would bring could reduce Maple's
leverage to a level acceptable to the TMX board.
TMX took pains on Thursday to say it was not making any
recommendations to shareholders regarding the current offer,
but ultimately, cash may still win the day.
"Life is a business of compromises," said Caldwell. "The
deal will probably be based upon price, which is not
necessarily the right thing, but we all have a responsibility
to our clients to get the best price."
(Editing by Rob Wilson)