* Q2 adjusted EPS C$0.81 vs C$0.94 a year earlier
* Net income C$0.02/shr vs C$0.73/shr, a year earlier
* Profit hurt by charges related to Maple deal
* Revenue fell 1 percent to C$167.5 mln
By Jennifer Kwan
TORONTO, July 27 TMX Group Inc, operator
of the Toronto Stock Exchange, reported a drop in quarterly
profit on Friday, hit by a substantial charge related to an
im m inent C$3.8 billion ($3.76 billion) takeover by the Maple
Group consortium of Canadian financial institutions.
Maple, a consortium of 12 big banks, pension funds and
insurers, recently won approvals from provincial regulators and
the federal Competition Bureau to buy TMX. Maple will put TMX
and TMX's biggest domestic rival, Alpha Group, under the same
umbrella along with clearing house Canadian Depository for
A C$54.4 million charge for the Maple deal pulled down TMX
net income in the second quarter to C$1.8 million, or 2 Canadian
cents a share. That compares with income of C$54.7 million, or
73 Canadian cents, a year earlier.
The charge included a C$29 million break fee due to the
London Stock Exchange -- with which TMX had agreed on a takeover
deal before Maple intervened -- and C$23.4 million in legal,
advisory and other costs.
"Put simply these are the costs associated with successfully
reaching the finish line with Maple, which we expect to do on
July 31," TMX Chief Executive Tom Kloet told a conference call
"The Maple transaction delivers value to shareholders, while
positioning TMX Group for future growth."
Excluding Maple-related charges and other one-time items,
earnings dropped to 81 Canadian cents a share from 94 Canadian
cents, excluding special items, in the year-before quarter.
Revenue fell 1 percent to C$167.5 million, reflecting lower
revenue from new listings, financings and equity trading due to
a rocky global economic recovery, the company said.
TMX urged shareholders to tender their shares to Maple ahead
of the July 31 bid deadline. TMX agreed to back Maple's bid last
October, after initially rejecting the unsolicited offer that
was put together to foil TMX's friendly deal with the London
TMX shares were 28 Canadian cents lower at C$49.20 on Friday
morning on the Toronto Stock Exchange, slightly shy of Maple's
offer price of C$50 a share.
Maple has touted its proposal as the best way to keep
Canadian exchanges out of foreign hands, while ensuring that
Toronto is able to maintain its status as a financial hub.
TMX said it expects to incur a one-time cost of C$24 million
to achieve annual cost savings from the Maple deal. Those annual
cost savings are expected to be about C$20 million beginning in
TMX also runs TSX Venture Exchange for small-capitalization
stocks and the Montreal Exchange for derivatives, among other
ROCKY GLOBAL RECOVERY
Weakness in equity markets was largely due to uncertainty
about Europe's debt crisis and its impact on global economic
growth, which has battered the Toronto Stock Exchange (TSX).
Volumes on the TSX and the Venture Exchange sank 17 percent
and 41 percent, respectively, in the quarter. Kloet said total
capital raised on the exchanges was down 28 percent from a year
earlier, while financings were also hit hard.
But weakness in equity markets was partly offset by higher
trading volume on TMX's energy market - the Natural Gas Exchange
- and increased revenue from options and derivatives trading and
clearing platforms such as the Montreal Exchange, Boston Options
Exchange and the Canadian Derivatives Clearing Corp (CDCC).
TMX said on Friday it is looking at a number of
opportunities to expand its business, both within and outside of
Many market observers say the Maple takeover opens the door
to a bigger role for the enlarged entity in the global exchange
industry, with expanding into U.S. markets apparently first on
the agenda. According to sources, TMX is in talks to buy Direct
Edge Holdings LLC, the No. 4 U.S. stock exchange.
"On the one hand, I think they are a logical acquirer in
that they have a dominant and complete market position in
Canada. It's logical they'd be looking to press out of the their
borders, particularly in the United States," said Ed Ditmire, an
analyst at Macquarie Securities in New York.
"On the other hand, the thought of doing three simultaneous
acquisitions and integrations is a full plate for any company.
So we would have some concerns about the whether or not the
execution of all these might suffer from the crowded agenda."