Canadian banks, pension funds bid $3.6 billion for TMX

TORONTO — A group of four big banks and five pension funds has submitted a $3.6 billion rival bid for stock market operator TMX Group, hoping to derail a controversial merger with the London Stock Exchange.

TORONTO — A group of four big banks and five pension funds has submitted a $3.6 billion rival bid for stock market operator TMX Group, hoping to derail a controversial merger with the London Stock Exchange.

The financial companies, who call themselves Maple Group Acquisition Corp., said Sunday they have sumbitted a proposal to TMX’s board that would see the stock markets operator stay in Canadian hands and have a broad ownership base.

As well, Maple Groui 1/8 plans to merge the TMS with the bank-owned Alpha trading company and CDS clearing and depository firm to create a bigger Canadian-based exchange.

The bidder says it would seek Competition Bureau approval for such a merger, but its $3.6 billion bid is not conditional on that.

Maple said its $48 a share cash and stock swap bid will enable TMX Group to achieve the scale and efficiency it needs to succeed in an increasingly competitive marketplace.

As well, the bidder said its plan will allow the owner of the Toronto Stock Exchange and junior Venture Exchange to continue financing global resource companies as well as Canada’s venture, energy and derivatives markets.

In addition, Maple says its bid will preserve Canadian governance, decision-making and regulatory oversight of Canadian exchanges while allowing TMX to pursue strategic opportunities internationally.

TMX Group is in the midst of an attempted multibillion-dollar merger with the London Stock Exchange, a proposal that has met with some opposition, including from some of Canada’s big banks.

Maple’s investors include: Alberta Investment Management Corporation, Caisse de depot et placement du Quebec, Canada Pension Plan Investment Board, CIBC World Markets Inc., Fonds de solidarite des travailleurs du Quebec, National Bank Financial Inc., Ontario Teachers’ Pension Plan Board, Scotia Capital Inc. and TD Securities Inc.

The group does not include Canada’s biggest bank, the Royal Bank, or Bank of Montreal. Both banks are advisers to TMX and the London Stock Exchange on their friendly merger.

MX Group said its board will evaluate the proposal, but it will continue to seek regulatory and shareholder approvals required to complete its merger with London Stock Exchange Group, a deal announced in February.

If the Maple Group deal succeeds, existing shareholders of TMX Group would own 40 per cent of Maple’s shares, the pension fund investors would hold 35 per cent and the bank-owned investment dealers about 25 per cent.

Moreover, no shareholder of Maple would own more than 10 per cent of Maple’s total shares, consistent with existing regulations.

“As like-minded investors, we believe there is an opportunity to create significant value by capitalizing on TMX’s strengths to build a stronger integrated exchange and clearing group – and by doing so, to secure the future growth and ongoing integrity of the Canadian capital markets,” Luc Bertrand, vice-chairman of National Bank Financial, said in a release.

“We believe our offer constitutes a superior proposal under which shareholders would receive cash, plus the opportunity to continue to participate in the company’s ongoing growth.”

Ontario Finance Minister Dwight Duncan welcomed the bid and said he received a briefing from its backers, but declined to name who was behind it.

“I applaud them, I think they’re also Canadian patriots,” he said in a phone interview Saturday when the TMX revealed it had received a rival offer but provided no details.

“I think they recognize how important our financial services is to a brighter future for Canada.”

Duncan is among those who have expressed concern that a merger with the London exchange could leave Canada’s biggest stock exchange dominated by foreign interests.

“It (the bid) appears to address a number of the concerns that I have raised with respect to governance and control,” Duncan said.

Maple Group said a compelling part of its plan is the proposed combination of TMX Group with Alpha Group and CDS to create an integrated trading and clearing exchange for equities, bonds, energy products and derivatives in both exchange-traded and over-the-counter markets.

The bidder said “this proven and highly-valued business model, which currently exists at Deutsche Bvrse, Hong Kong Exchanges and Clearing and the Australian Securities Exchange, would dramatically broaden TMX Group’s business activities, generate substantial growth opportunities, and create significant synergies (including cost rationalization) all for the benefit of TMX Group, its shareholders and Canada’s standing as a global financial centre of excellence.”

Alpha Group was set up in 2007 by BMO Nesbitt Burns, Canaccord Capital, CIBC World Markets, the CPP Investment Board, Desjardins Securities, National Bank Financial, RBC Dominion Securities, Scotia Capital and TD Securities.

CDS , the Canadian clearing and depository firm, is two thirds owned BMO, ScotiaBank, TD Bank, Nantional Bank, CIBC, and RBC, the Investment Industry Regulatory Organization of Canada, with just over 15 per cent, and TMX Group with about 18 per cent.