Canada Pension Plan Investment Board, the largest shareholder of TMX Group Inc., has sold its entire 9.3-per-cent stake in the owner of the Toronto Stock Exchange.
CPPIB grossed $465-million on a $271-million investment. But the sale represents more than just a big investment win: It’s the end of CPPIB’s role as part of a consortium of big Canadian players who in 2011 stepped in and kept the TSX in Canadian hands. CPPIB and several big pension plans and financial companies formed “the Maple Group” that year to outbid the London Stock Exchange for TMX Group.
“CPPIB has been a long-term investor in the company and this stake sale reflects ordinary-course portfolio management,” CPPIB said in a statement announcing the pension plan’s results. CPPIB said the sale of its stock in TMX Group occurred in open-market sales and was “completed” in the third quarter.
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TMX Group shares are up nearly 60 per cent this year, putting the stock among the top 10 per cent of performers in the S&P/TSX Composite. The shares hit a 52-week high of $120.48 on Sept. 6; the stock gained more than a third in a little more than two months this summer, allowing CPPIB to sell into a rising market. The company said a week ago that it was boosting its dividend by 6 per cent on the strength of its earnings.
In an e-mailed statement, TMX Group chief executive Lou Eccleston declined to comment specifically on the CPPIB sale, but said that since Maple Group shareholders became free to sell their shares, "TMX Group’s shareholder base has become increasingly globally diversified, in step with the progress we have made in executing our growth strategy.” (In order to continue nominating members of the board, a Maple shareholder was required to maintain a 5-per-cent shareholding. But in September, 2018, the shareholders no longer had the right to nominate board members.)
At net proceeds of $465-million, CPPIB realized less than $90 per share for its stake of 5,234,000 shares of TMX Group. With a total of slightly more than 11 million TMX Group shares traded in the entire third quarter, CPPIB likely began selling its stock prior to the quarter’s start.
Securities filings at the time of the TMX Group deal showed four major pension plans – CPPIB, Caisse de dépôt et placement du Québec, Alberta Investment Management Corp. and Ontario Teachers‘ Pension Plan Board – were the largest owners of Maple Group, with each owning 12 per cent. A number of banks, insurers and investment funds owned the remainder.
CPPIB’s exit makes FMR LLC, the manager of Fidelity mutual funds, TMX Group’s largest shareholder, with 6.85 per cent of the company, according to S&P Global Market Intelligence. Caisse de dépôt et placement du Québec still had 2,845,267 TMX Group shares at the end of 2018, according to S&P.
In the spring of 2011, TMX Group reached a deal to sell itself to the London Stock Exchange, saying Toronto would rise in importance as a global financial centre by aligning itself with an international partner. But the Maple Group coalition said its “made-in-Canada” proposal would keep more control of the stock exchange in domestic hands.
After TMX Group rebuffed Maple Group, the latter took its offer directly to TMX Group shareholders, and ultimately won. It triumphed over concerns that Canadian competition would be lessened because some of the Canadian banks who were part of the Maple Group also owned the TMX’s top competitor at the time, Alpha Group.
CPPIB’s TMX sale was included in a list of notable transactions in its results for the quarter ended Sept. 30. CPPIB posted a 2.3-per-cent return, helping it maintain double-digit long-term returns and add nearly $10-billion to its total assets, which were $409.5-billion at quarter’s end.
CPPIB is the investment manager for the Canada Pension Plan, which was founded in 1966 as the primary retirement-security program for working Canadians. The government created CPPIB in 1997 to professionally manage the plan’s money.
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David Milstead