TMX Group has said just because a group of Canadian banks and pension funds were offering more than the London Stock Exchange Group to acquire it, it didn’t make their proposal superior. The Toronto Stock Exchange owner rejected an unsolicited bid from Maple Group Acquisition Corp yesterday, affirming its friendly agreement with the LSE parent.
Maple’s plan “is a different proposal in that it does require a change of control as opposed to our current merger agreement with LSE Group, which is a combination of the holding company whereby our shareholders continue to share in the growth of the company,” Thomas Kloet said yesterday.
The C$3.6 billion ($3.7 billion) proposal from Maple, a group of four Canadian banks and five pension funds, would also result in too much debt, TMX said. The company estimated an acquisition would boost its debt to 2.9 times 12-month earnings before interest, taxes, depreciation and amortisation, from 1.1 now.
The leverage “generates much, if not all, of the earnings accretion referenced in the Maple proposal and could constrain TMX Group’s ability to execute and implement strategic opportunities,” TMX said.
Luc Bertrand, vice chairman of National Bank of Canada and a spokesman for Maple Group, said, “we are disappointed the TMX board has decided not to engage in discussions with respect to our clearly superior proposal.” The group will “determine” its next steps, according to a statement yesterday.
EXCHANGE ACQUISITIONS
LSE’s bid for TMX was part of about $30 billion in takeover offers for exchanges globally in less than six months, as bourses try to cut costs and generate more revenue from trading in stocks, options and futures. Nasdaq OMX Group and IntercontinentalExchange dropped an unsolicited attempt to buy NYSE Euronext, owner of the New York Stock Exchange, on May 16, after battling with Frankfurt-based Deutsche Boerse AG.
On May 13, Maple offered to buy TMX for cash and stock valued at about C$48 a share. LSE’s February 9 agreement would give TMX shareholders 2.9963 LSE shares for each TMX share. LSE investors would own 55 per cent of the company, while TMX shareholders would hold the rest.
In comparison, under the Maple plan, TMX shareholders would get C$33.52 in cash, plus 0.3016 of a Maple share, for each TMX share. The group, which was created for this bid, would pay as much as C$2.5 billion in cash under the proposal, priced about 15 per cent higher than the LSE offer.
ALPHA GROUP
Maple also said it aimed to acquire Alpha Group, a bank-owned operator of an alternative trading system competing with TMX, and Canadian securities clearing house CDS, after completing a takeover of the Toronto Stock Exchange owner.
LSE needs approval from Canada’s federal government as well as provincial securities regulators and two-thirds of shareholders. LSE and TMX submitted their application to Canada’s federal government on April 29. The country’s industry minister has 45 days, with a potential 30-day extension, to review the application to determine if the transaction was a “net benefit” to the country.
The Maple bid wouldn’t require Industry Canada approval as it was not a foreign transaction, though it would face reviews by regulators and Canada’s competition bureau, the group said earlier.
