TMX board backs Maple takeover bid

The board said it took into account a number of factors in reaching the decision, including the value of the transaction to TMX Group shareholders; the opportunity to create an integrated exchange and clearing group, by buying out trading rival Alpha Group and clearing agency CDS; the possible capital efficiencies and cost savings that could emerge from an integrated group; and enhanced international competitiveness.

Maple also announced that it has today entered into an agreement with Alpha Group setting up a mechanism to agree on the purchase price for Alpha Group which will then form the basis for an offer to be made to Alpha Group investors. Maple has also begun its due diligence investigation of CDS in order to enable it to make a proposal to acquire CDS.

As a result of the move to enter a support agreement, Maple has also agreed to extend its offer until January 31, 2012. Either Maple or TMX may terminate the support agreement if the Maple offer has not been completed by February 29, 2012, although this date may be extended to April 30, 2012 in order to obtain the required regulatory approvals.

Maple has also agreed to pay TMX Group a reverse termination fee of $39 million if the Maple transaction is not completed because required regulatory approvals are not obtained. Regulatory hearings have been set for late November in Quebec and early December in Ontario; and the deal also needs he approval of regulators in Alberta and BC and the federal Competition Bureau.

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Among other things, the support agreement addresses questions related to corporate governance that were raised by the TMX board. Under the agreement, the chair of the Maple board will be independent and not appointed under a nomination right, and will be selected in consultation with TMX; four independent members of the TMX board (who will be jointly selected by TMX and Maple) will join the Maple board; at least 50% of the proposed 15 member board will be independent and will also include four nominees from Maple pension fund investors, at least one nominee from the independent investment dealer community, four nominees from Maple bank-owned participating organizations and the CEO; the composition of the board will respect the existing TMX structure with at least 25% of the directors residents of Québec, at least 25% of directors with expertise in venture capital markets, and at least 25% of directors withe expertise in derivatives; and, it will have a governance committee comprising only independent members.

The TMX Group Board has received separate fairness opinions from Merrill Lynch Canada Inc. and BMO Nesbitt Burns Inc. that support the deal.

“The board carefully examined the Maple proposal, its value to shareholders and its potential benefits to the company and the Canadian capital markets. TMX Group and Maple reached agreement on the strategic direction of the company and addressed issues we had previously identified to the satisfaction of both parties,” said Wayne Fox, TMX chair.

“The board has unanimously determined that the Maple offer is in the best interests of the company, our shareholders and stakeholders, and advises our shareholders to accept the Maple proposal. We look forward to working with regulatory authorities towards obtaining approval of a transaction that enhances and strengthens Canadian capital markets,” Fox added.

Speaking on behalf of Maple’s investors, Luc Bertrand said it remains confident that it can obtain the required regulatory approvals by early 2012.