Maple extends $3.8 billion bid for TMX

The consortium has already extended the deadline several times as it awaits regulatory approval for the plan that would see it control as much as 90% of trading activity in Canada, which has prompted intense scrutiny at the provincial and federal level.

It conceded last week that the bid was unlikely to receive regulatory approval before the latest Monday deadline.

Maple announced Monday that it reached definitive agreements for the acquisition of the alternative trading platform Alpha Trading Systems Inc. and the Canadian Depository for Securities Ltd., following several months of negotiations.

However, the group still needs regulatory approvals to merge TMX with the alternative Alpha and CDS, which are owned by the major players in the Canadian securities industry, several of which are part of the consortium.

Any potential closing of the deal could still be months away, which would mean the bid will see its one-year anniversary on May 15th.

Maple said Monday it is offering $175 million for Alpha, which is already majority-owned by the members of the Maple Group. Non-Maple group investors own about 25.6% of Alpha.

It also entered into an amalgamation deal worth $167.5 million with CDS shareholders who hold about 71% of its voting rights, including the TMX Group’s 18% indirect interest. Under terms of the agreement, outstanding preferred CDS shares would be redeemed for about $6.1 million. Maple said the votes of those shareholders will give the deal the necessary two-thirds shareholder approval.

“These agreements are important milestones in our effort to realize our vision for a stronger and more globally competitive exchange and clearing organization,” Maple spokesman Luc Bertrand said in a statement.

“We remain focused on securing the regulatory approvals required to complete the proposed transactions and deliver significant benefits to participants in Canada’s capital markets.”

The discussions involved special committees of independent directors that do not have ownership interests in Alpha or CDS, given the ownership stakes held by many of Maple’s members and the TMX.

The Competition Bureau remains the big hurdle for the takeover deal. And the federal watchdog has signalled it would need to see “a significant and material change to the competitive consequences” of the proposed deal to address its serious concerns.

An update on the status of the Bureau’s review prompted both Maple and TMX Group to provide an update last Friday on the situation.

Maple said the Bureau told the groups that changes proposed by the Ontario Securities Commission, which have not yet been made public, could alter the deal to diminish the federal watchdog’s concerns.

The OSC has held extensive hearings into the deal’s impact on competition in Canada’s market sector, including smaller players’ concerns that the deal would concentrate 90% of Canadian trading activity at TMX and that it could charge unfair prices as a result.

The draft recognition order from the OSC is subject to a 30-day public comment period and other provincial regulators have indicated they would undergo a similar process. The Competition Bureau has indicated it will not make a final decision until it has time to consider both the published draft order and any final orders, Maple has said.

Regulators in Quebec, B.C. and Alberta have also signalled their intention to publish public notices on the deal, it added.

Quebec’s Autorite des marches financiers said last month it intends to approve the transaction. But it will also publish a 30-day comment period regarding Maple’s proposed acquisition of CDS.

Tom Kloet, chief executive officer of TMX Group said Monday the company remains committed to securing regulatory approvals for the takeover.

“TMX Group’s goal is to provide enhanced efficiency and new capabilities for the benefit of all market participants. We continue to work with Maple to secure the required regulatory approvals and look forward to making an even stronger contribution to the performance and success of Canada’s capital markets.”

The proposed Maple deal offers to buy 70% of TMX for $50 per share, plus a process that will see current TMX shareholders receive a 40% stake in the new company in exchange for their remaining shares.

Maple investors would end up holding the remaining 60%.

Maple continues to commit not to allow any person or company to acquire more than 10% of its voting shares without prior approval of the regulator.

TMX Group’s board originally supported a merger proposal with the London Stock Exchange Group and dismissed the Maple Group offer over a number of debt, competition and regulatory concerns.

But after the LSE deal failed to gain enough shareholder support in the face of the richer Maple bid last June, the board turned its attention to the Maple offer.

Maple is made up of Alberta Investment Management, Caisse de depot et placement du Quebec, Canada Pension Plan Investment Board, CIBC World Markets, Fonds de solidarite des travailleurs du Quebec, National Bank Financial, Ontario Teachers’ Pension Plan Board, Scotia Capital, TD Securities, Desjardins Financial Group, Dundee Capital Markets, GMP Capital and Manulife Financial.

Shares in TMX Group were up 40 cents to $45.10 Monday on the Toronto Stock Exchange.