* Says friendly deal only possible with regulatory support
* Says “starting gun” on process has not yet gone off
* TMX shares trading well below bid price
* TMX looking for acquisitions, would do $1 bln deal
* Kloet happy to stay on as TMX head under any scenario (Recasts, adds details, quotes; updates share price)
By John McCrank and Pav Jordan
TORONTO, Sept 30 (Reuters) - Behind the scenes talks between TMX Group (X.TO) and suitor Maple Group have yet to bear fruit, but TMX head Thomas Kloet has not ruled out backing the C$3.8 billion ($3.7 billion) hostile bid for Canada’s largest stock exchange operator.
“We are trying to find that out,” Kloet said, when asked if he would consider backing a deal that would put the Toronto Stock Exchange in the hands of many of the country’s big banks. “I don’t really know the answer to that,” he said in an interview with Reuters on Friday.
He added that a friendly deal was only possible if regulators support the Maple plan, and that it is impossible to say how long the regulatory review process will take.
“I think that, when you agree to a deal, you have to agree to a deal that has a likelihood of being executed,” he said. “In any of these deals ... and in this one in particular, you have a highly regulated organization. What the market has to consider is the regulatory risk of doing a deal.”
Shares of TMX were up 0.54 percent at C$40.76 on Friday afternoon, well below Maple’s C$50 bid.
On Thursday, Maple, a consortium of heavy-hitting Canadian financial institutions, extended its deadline to Oct. 31 for TMX shareholders to tender to the bid.
It was the second extension in under two months as Maple works to secure shareholder and regulatory support for its offer, which it launched in response to a friendly takeover bid for TMX by the London Stock Exchange (LSE.L).
The LSE’s failed to gather enough shareholder support in the face of Maple’s competing offer.
“STARTING GUN” HAS YET TO GO OFF ON DEAL
In warding off the LSE, Maple managed to tap in to nationalist sentiment that Toronto’s growing clout as a financial center would be threatened by the London deal.
Now Maple’s plan to merge Canada’s biggest alternative exchange, Alpha Group, as well as clearing house CDS, into the TMX, needs to pass muster with provincial securities regulators and the federal Competition Bureau in separate processes that are seen stretching out until November or December.
Maple, which includes four of Canada’s largest banks, four top pension funds and one of North America’s largest life insurers, has yet to make any regulatory filings on the deal.
“I look at it as the starting gun on the process actually goes off when the filings get made and the public comment period starts,” Kloet said.
Meantime, Kloet has more than enough to keep him occupied.
TMX Group includes a derivatives market, a North American energy exchange, a market data business, the Toronto Stock Exchange and the small-cap TSX Venture Exchange, as well as strategic partnerships with other exchanges, such as ICE.
“UNEQUIVOCALLY” IN ACQUISITION MODE
Much of its expansion came about through acquisitions, and Kloet said TMX is “unequivocally” still in acquisition mode, and would have no problem doing a deal upward of $1 billion.
“We would look at each opportunity that comes up in the face of what would help our strategic positioning and be accretive to earnings per share,” he said.
He would not say if TSX was one of at least 10 potential suitors that plan on taking look at the books of London Metal Exchange, which is putting itself up for sale. [ID:nL5E7KU0YT]
Kloet reiterated that he would like to have stock clearing firm CDS as a part of TMX, which jibes with Maple’s plan, but right now he is not very keen on Alpha, which is mostly owned by Maple members.
“I wouldn’t want to say that we wouldn’t consider buying Alpha at some point, I suppose, but it’s certainly not in the cards right now,” he said. “Alpha has brought little to the marketplace that is very new.”
Maple has said it has a lot of confidence in the management of TMX, which has generated forecast-topping results, adding credence to the idea that the exchange operator could easily continue on its own. [ID:nL3E7J526L]
Kloet said he would be happy to stay in his role as head of the TMX no matter who its stakeholders end up being.
As to the eventual outcome of the Maple process, Kloet said he was not really thinking about that.
“We actually don’t control any of the puck,” he said, using a hockey metaphor. “If it became friendly, then we would control more of the puck.”
$1=$1.04 Canadian Editing by Peter Galloway and Rob Wilson