June 9, 2011 / 5:41 PM / 7 years ago

REFILE-Maple Group readies document to sell its TMX offer

* Maple’s circular expected to be released any time

* Document would formally start hostile bid for TMX

* Maple may raise its offer, detail Alpha and CDS values


By Pav Jordan

TORONTO, June 9 (Reuters) - The Maple Group consortium of Canadian banks and pension funds chasing a hostile takeover of TMX Group (X.TO) is preparing its formal pitch to convince shareholders its offer is the best one on the table.

The group is expected to take its bid directly to shareholders by means of a circular outlining its $3.7 billion cash and stock offer. It’s competing against a friendly, $3.5 billion offer by the London Stock Exchange Group (LSE.L) that TMX’s management supports.

“The circular will be an opportunity for the group to explain to the shareholders what we are trying to achieve,” said a Maple Group source, who spoke on condition of anonymity because the circular has not yet been released.

The window of opportunity for Maple to win over shareholders to its side before they vote is closing. On June 30 TMX investors will vote the LSE’s all-stock bid. Maple’s circular, which is expected any time now, is likely its best, last chance to carry the day.

An exclusive Reuters poll earlier this week showed shareholders have yet to rally around either bid, meaning that the spoils will likely go to the suitor who does the best sales job. [ID:nN02266428]

Maple’s headline offer of C$48 a share, comprising C$33.52 in cash plus 0.3016 of a Maple share for each TMX share, appears superior to the LSE’s all-stock bid.

The LSE bid was valued closer to $3 billion when it was made Feb. 9 but has risen with LSE shares, reflecting investor opinion that a deal may not go through.

Maple’s bid hinges partly on regulatory approval of the acquisition of Alpha, Canada’s No. 1 alternative trading system, and the CDS stock trade clearinghouse. The two privately held companies have no clear valuations, and the Maple circular is likely to fill in at least some of the blanks.

Along with the Toronto Stock Exchange, TMX Group owns the TSX Venture Exchange for small-cap companies and the Montreal Exchange, Canada’s main derivatives bourse. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ FACTBOX-Key players in TMX takeover battle [ID:nN02238198] TIMELINE-Battle to take over TMX Group ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Maple would control more than 80 percent of Canadian stock trading by volume if it succeeds, raising competition concerns.

But one of its main selling points is it would keep control of Canadian capital markets in the hands of Canadian financial institutions. Critics say the LSE deal would put London at the helm.

    Analysts say the circular is likely to play up the all-Canadian cast of the bid while playing down the impact of its dominance over domestic stock trading.

    “This document, if it does what I think it’s going to do and what I hope it’s going to do, will detail some of the plans for this newly owned TMX Group,” said Alison Crosthwait, director of global trading strategy at Instinet, which operates Canada’s second-largest alternative trading system Chi-X.

    “So cost savings, growth plans, what they plan to do with CDS and Alpha and how they are valuing those combinations or potential combinations.”


    The LSE and TMX have broadcast their message that a combination of the exchanges would create a $7 billion transatlantic exchange and a powerhouse in mining and resource equities doing $4 trillion in annual trading.

    Opponents to the deal - including the four banks behind the Maple Bid - Toronto Dominion Bank, Canadian Imperial Bank of Commerce, National Bank of Canada and Bank of Nova Scotia - say it would hurt Toronto’s ambitions to become a global financial services hub as control shifts to London.

    The circular could also announce that at least three if not four more Canadian financial firms will join Maple, bolstering its all-Canadian appeal.

    “They’ve got a good plan in principle and now they need to get granular and say, ‘how can we actually make this work,” said Crosthwait.

    “I think really what everybody wants to know is, what is the present value of the deal, not just the value of the stock, but for the future prospects of holding that stock, and that is what the shareholders want to know.”

    Editing by Frank McGurty

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