June 13, 2011 / 10:31 AM / in 6 years

Maple Group goes hostile for TMX

* Maple Group files C$3.7 billion hostile bid for TMX

* Bid proposes C$48 a share cash for 70 percent of shares

* Maple urges shareholders to vote against LSE’s agreed bid

By Solarina Ho

TORONTO, June 13 (Reuters) - Maple Group launched a C$3.7 billion ($3.8 billion) hostile bid for Toronto Stock Exchange operator TMX Group (X.TO) on Monday, an all-Canadian challenge to the London Stock Exchange’s (LSE.L) agreed bid.

The Maple Group consortium’s long-awaited official bid proposed C$48 a share cash for 70 percent of shares, compared with 60 percent in the original proposal nearly a month ago.

The group, comprised of four leading banks, five top pension funds and four new institutional investors, said in a takeover circular to shareholders that its offer was “superior” in value and provided greater certainty for TMX shareholders.

The C$3.7 billion figure is based on C$48 multiplied by the number of fully diluted shares, Maple said. Previously, the C$3.6 billion value of the proposed offer was calculated based on the number of basic shares outstanding.

With less than three weeks left until investors vote for the LSE-TMX deal, the Canadian consortium urged shareholders to vote against its rival. Maple’s bid dies if TMX shareholders vote for LSE’s $3.4 billion offer on June 30.

“TMX Group shareholders should be aware that Maple’s offer can only proceed if the LSE take-over plan does not,” Luc Bertrand, Maple’s chief spokesman and vice-chairman of Quebec-based National Bank, said in a statement.

Unlike LSE shareholders, TMX investors do not get a second vote if there are conditions attached to any regulatory approvals that may come after June 30.

The consortium said in its circular that unlike LSE’s all-stock offer, Maple’s bid offers cash to shareholders and would maintain TMX’s current dividend. It also disputed LSE and TMX’s assertion that the transatlantic tie-up would enhance liquidity for Canadian capital markets.

The heads of TMX and LSE, Tom Kloet and Xavier Rolet, said on Friday their bid was different from other transatlantic exchange tie-ups in that it focused on growth and building new businesses rather than cost and revenue savings. [ID:nN10178486]

LSE’s planned takeover must pass muster with the Canadian government, which will decide if it meets the terms of the Investment Canada Act, which says foreign takeovers must carry a “net benefit” to Canada. [ID:nN07117538]

“We think we’re in quite good shape now,” Kloet told a global exchanges conference hosted by Sandler O‘Neill in New York on Friday. He said the company was “in active dialogue” with the government over the deal.

NO BOARD CHANGES

In addition, Maple said it would maintain the current CEO and senior management as well as existing commitments regarding TMX’s board.

The valuation of Alpha Group, Canada’s main alternative trading platform and the CDS clearinghouse -- two entities Maple hopes to acquire as part of the deal -- has been a key concern for undecided shareholders. [ID:nN02266428]

While Maple did not provide specific valuations, it offered an illustrative value of the two entities.

Maple Group - initially four leading banks and five top pension funds - added Desjardins Financial Group, GMP Capital Inc (GMP.TO), Dundee Capital Markets (DCM.TO) and Manulife Financial (MFC.TO) to their ranks on Sunday. [ID:nN12291317]

The move further bolsters the home-grown credentials of a bid that its supporters say would preclude the possibility of Canadian capital markets falling under foreign control.

Maple’s original bank members are the Bank of Nova Scotia (BNS.TO), Canadian Imperial Bank of Commerce (CM.TO), National Bank of Canada (NA.TO) and Toronto Dominion Bank (TD.TO).

The five pension funds in the group are Alberta Investment Management Corp, Caisse de depot et placement du Quebec, Canada Pension Plan Investment Board, Fonds de solidarite des travailleurs du Quebec (FTQ) and Ontario Teachers’ Pension Plan Board. (Reporting by Solarina Ho; editing by Sophie Walker)

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