Maple Group Acquisition Corp. is coming out swinging against London Stock Exchange Group PLC's rival bid for TMX Group as the clock ticks down to a June 30 shareholder vote.
The consortium led by Canadian banks and pension funds made its bid for the TMX official on Monday by mailing its offer to TMX shareholders, and took the unusual step of simultaneously launching a proxy fight in an attempt to gather "no" votes on the LSE bid.
Maple Group urged TMX shareholders to vote against the LSE deal, laying out its case why it believes its offer is better, such as a stronger ability to maintain the dividend.
The group is also attempting to play the patriotism card, calling TMX "a great Canadian success story."
"Our superior offer will support high-quality professional jobs in Canada and will ensure TMX Group remains headquartered in Canada," the group stated in its bid circular. "We believe an LSE takeover will ultimately diminish TMX Group's role in decision making and Canada's standing as a global centre of financial excellence."
Maple Group added four members to its ranks last week, and now consists of four of the country's big banks, five pension funds, Desjardins Group, Manulife Financial Corp., GMP Capital Inc. and Dundee Securities Corp. But TMX Group has rejected the Maple proposal, saying it prefers to stick with the LSE arrangement, which has been billed as a merger of equals.
On Monday, the TMX's board said it will re-evaluate Maple's offer, but is continuing to work toward the June 30 vote on the LSE deal.
Maple Group's use of patriotism as a selling point for its deal is potentially a double-edged sword. Maple Group would like to try to tap into that sentiment in its dealings with regulators and Canadian TMX shareholders and also with the general public, whose views could influence Ottawa's thinking as it decides whether to approve the LSE deal under the Investment Canada Act.
But there is also a risk that it could fuel the perception that Canada's power brokers are joining forces to block the LSE merger simply because it's a foreign bid. That perception could work against the group. In the recent Throne Speech, the Conservative government stressed that its rejection last fall of BHP Billiton's bid for Potash Corp. of Saskatchewan Inc. did not signal a trend toward protectionism, saying that it "understands the importance of attracting foreign investment to our economy."
The decision by 13 of Canada's most powerful financial institutions to band together and make a bid to fight the LSE's friendly offer, in an age when takeover consortiums frequently consist of companies from several countries, is stirring criticism that Canada is becoming hostile to foreign takeovers - criticism that LSE is likely to exploit.
Laurence Booth, a professor at the Rotman School of Management at the University of Toronto, said he has been contacted by foreign media asking what the Maple bid says about Canada's openness, and "there is some concern." Mr. Booth said he told them that "there have been very few instances of political intervention, and the list of Canadian crown jewels that have been sold is a lengthy one."
In a comment piece last month, Ian King, business editor at The Times of London, wrote that "the nationalistic response from Canada's financial services industry to the London Stock Exchange's planned merger with the Toronto-based TMX, culminating in the Maple Group's bid for the latter, suggests the narrow parochialism on display last year when Ottawa blocked a $39-billion bid by BHP Billiton for Saskatchewan's Potash Corp., because it was a strategic Canadian asset, is not confined to government."
Luc Bertrand, the National Bank of Canada executive who is acting as Maple's head and spokesman, said: "I don't think you get 13 financial institutions who on a combined basis have about $1-trillion under management, or in different kinds of assets and so forth, to commit to an arrangement on a patriotic basis." All the parties committed to the bid based on the potential financial return from the deal. "This is a business and a business case and it's based on solid economics," he said.
"We support the Maple transaction on its merits of offering superior value," said Deborah Allan, a spokesperson for the Ontario Teachers' Pension Plan. "We seek the best value we can find internationally on our members' behalf."
Rejean Robitaille, CEO of Laurentian Bank of Canada, which is not part of Maple Group but may seek to join later, said he remains opposed to the proposed LSE merger because the potential benefits, such as technology savings, are outweighed by the downside.
"On the negative side, what will happen four years from now?" Mr. Robitaille said in an interview. "It's going to be far from the heart, far from the eyes."
Mr. Bertrand also suggested that he's not a believer in the large transatlantic mergers that are reshaping the exchange industry, and that his vision for the TMX under Maple ownership is that it would remain within a certain niche. "That's not to say that you can't do deals that would work on a cross-border, cross-jurisdiction basis," he said during the interview. "But so far the experience of the ones that have been transatlantic have not created a lot of value, if any at all, for their shareholders."
Grant Robertson